Today Chris Komatinsky released the following open letter to Rite Aid Corporation Shareholders (NYSE: RAD):
Los Angeles, CA -- (ReleaseWire) -- 09/11/2018 --Contact:
One month has passed since the Aug 8th termination of the merger agreement with Albertsons. A merger agreement that Rite Aid wasted considerable time and money to push but was very much disliked and rejected by Rite Aid shareholders. This is a situation where a reasonable person would expect some significant, relatively quick changes given the chasm between shareholders and Rite Aid Leadership. Rite Aid paid significant lip service in the Aug 8th announcement to hearing and working with shareholders going forward, but as of Sep 10th there has been no (zero, na da, goose egg, zilch) visible action from Rite Aid.
In conversations with Rite Aid Investor Relations since my Aug 27th letter, Rite Aid claims that they are working with shareholders (implication that this means large institutional shareholders) but that they're unable to share names. This means one of three things: either (1) Institutional shareholders are comfortable with Standley and the BOD staying to try to sell the company in the short term, (2) Institutions are comfortable with Standley and the BOD staying to continue to operate Rite Aid as a standalone company going forward, or (3) Rite Aid is just blowing smoke on the working with shareholders claim to buy time to let Albertsons/Cerberus back into a merger after letting the market/analysts tank the stock in a vacuum of no information from Rite Aid on how they can succeed as a standalone.
If the 1st situation is true, Institutional Shareholders need to ask themselves how can Rite Aid possibly get a reasonable price for its assets with the stock price in the tank at the current time. This would then logically require that Rite Aid management generate market confidence and demonstrate an ability to operate successfully as a standalone company for a period of time which is effectively the 2nd situation
If the 2nd situation is true, Institutional Shareholders need to ask themselves if Standley and the BOD have demonstrated the skills to generate market confidence and effectively run Rite Aid in a rapidly changing environment. The current share price reflects no market confidence in Standley and the current BOD. Standley and the current BOD have never really managed and operated Rite Aid effectively if you compare Rite Aid metrics to Walgreens and CVS. Standley was recently paid a $3 million retention bonus to stick around for the Rite Aid standalone plan. All shareholders got for this $3 million was Standley sitting on his hands since the Aug 8th merger termination with no more details on how Rite Aid will succeed as a standalone. He turned down a free opportunity to get the stand alone message out by declining to be interviewed for this Forbes article (https://www.forbes.com/sites/brittainladd/2018/09/09/bad-moon-rising-rite-aid-and-the-revolt-of-the-shareholders/#1025734816ce). What idiot turns down free press with a favorable audience for your message? This undeserved bonus also undermined the relationship with Rite Aid employees; how do you justify the need for pay and benefit changes for your Southern California Pharmacy employees when $3 million is handed to the CEO for nothing? Standley has lost the ability to lead Rite Aid, if he ever had it, and his retailing expertise has long gone stale in this new fast changing environment.
I'd like to believe that the 3rd situation is not true, but the aggressiveness of the market/analyst downgrades after the merger termination including the recent Goldman Sachs (Goldman advised Albertsons in the merger deal) re-initiation of coverage on Rite Aid (a company with a $1.5 Billion market capitalization) sure smells fishy. There's probably too much money at risk for Cerberus to walk away quietly. Rite Aid shareholders can defend against this possibility by getting rid of Standley and a few BOD members immediately.
Individual shareholders holding 34 million shares (registered at https://sites.google.com/view/rightriteaid) believe there should be immediate changes including firing of Standley for cause and replacement of at least two BOD members with shareholder representatives. Further changes can wait for the October annual meeting. We're interested in communicating with other shareholders to hear their opinions/rationale so we can speak with a united voice. Convince us we're wrong. You're also welcome to join us.
Feel free to contact me if you have any questions.
Individual Rite Aid Stockholder