Contact: Chris Komatinsky Individual Shareholder 310-947-4507 email@example.com
Los Angeles, CA -- (ReleaseWire) -- 06/11/2018 --Today Chris Komatinsky released the following open letter to stockholders of Rite Aid Corporation (NYSE:RAD):
I and my family are stockholders of Rite Aid Corporation with a position of around 1.5 million shares of the company's stock. Given the circumstances described below, someone needed to step forward to identify and try to address the problems with both company decisions/leadership/stewardship and shareholder leadership.
What are my goals with this effort? Organize shareholders as a united voice to reject the proposed merger with Albertsons and then put in place leadership that can unlock the value of Rite Aid's assets for shareholders.
First, the problems with CEO and Board of Directors (BOD) decision making/leadership/stewardship:
The CEO and BOD appear to have fixated on a merger with Albertsons as the answer rather than exploring options in a changing landscape that favored unique assets like the Envision PBM as evidenced by:
1. The negotiations with Albertsons/Cerberus where the BOD kept insisting that Rite Aid was worth more (presumably based on valuations from recent asset sales to Walgreens) until finally caving to Albertsons/Cerberus on valuation to get a deal done. Why didn't the BOD stand fast for a valuation they felt was appropriate?
2. The BOD failing to explore the interest in the Envision PBM expressed by several parties. What could a partial sale of the Envision PBM with protections for including Rite Aid pharmacies in PBM precription fills have netted? Would a partnership with the Envision PBM lead to faster growth?
3. The BOD failing to explore other alternatives such as a merger of just the Albertsons pharmacies with Rite Aid or a strategic partnership with Albertsons or other partner instead of a complete merger. Is it possible to share the benefits of working together without taking on the other company's baggage?
4. Continued pursuit of the merger even with new data such as market disagreement with the benefit of the merger with a 30% drop in Rite Aid stock, stockholder concern with Albertsons' $11 Billion debt leverage and $4 billion pension funding shortfall, stockholder concerns with valuation of Rite Aid's assets in the proposed merger agreement, stockholder concern with valuation of Albertsons' assets in the proposed merger after two failed public offerings, Moody's assessment that savings from the proposed merger may be difficult to achieve and the outlook for Albertsons debt is negative due to competitive pressures, and the continued ramp in competitiveness of the grocery sector since the agreement was announced (continued Amazon/Whole Foods, Walmart, and Kroger actions on price, service options, and selection).
The BOD and CEO fail to hold themselves accountable to shareholders for their decisions as evidenced by:
1. The BOD continues spending stockholder resources executing on the merger agreement in the face of negative market reaction to the deal.
2. The CEO pushed for this merger from the beginning. Since the merger agreement, the BOD approved a CEO "retention" bonus of $3 million payable if "the Rite Aid Board of Directors determines that the transactions contemplated by the Merger Agreement will not be consummated". Heads he wins, tails he wins less. Whatever happened to living with the consequences of one's decisions and actions?
3. The BOD approved further retention bonuses for the NEOs "to enhance employee retention and promote corporate performance, amidst significant volatility and uncertainty related to restructuring the company". Aren't the NEOs paid their generous salaries – 2018 compensation (Standley $9.3 million, Crawford $5.4 million, Karst $3.9 million, Everett $2.9 million) – to run the company? How are retention bonuses justifiable given the current compensation and the reduced company size and profitability?
The CEO should be held accountable if this merger is rejected by stockholders; accountability means no $3 million "retention" bonus and his immediate resignation. The BOD is supposed to ensure the company is run for the benefit of stockholders. The BOD decisions above appear counter to those responsibilities. The BOD should be held accountable by stockholders for their decisions. Stockholders should call for the immediate resignation of 5 (Jessick, Savage, Syms, Anderson, and Regan) of the 9 BOD members with replacements to be named by a stockholder committee.
Personally, I would like to see an independent investigation of CEO and BOD actions from just before the termination of the WBA merger agreement to present to make sure prior actions weren't contrary to the benefit of stockholders but that can be discussed/decided as a larger stockholder group.
Second, the problem with shareholder leadership:
Large shareholders have been entirely passive in backing Rite Aid BOD recommendations which has led to the current CEO and BOD composition and their decisions affecting share value. Large shareholders like Vanguard Group, Oppenheimer Funds, Franklin Resources, Blackrock, State Street, and CALPERS have a fiduciary duty to their investors/members that their funds are invested in companies with sound governance. The governance issues identified above will potentially cost your investors/stakeholders tens or hundreds millions of dollars. If you don't have the time/resources to engage personally, I encourage you to reach out to someone who can act in your interests. Highfields Capital Management (5% owner) is reportedly against the merger and may be concerned with Rite Aid Corporation governance. A group of individual shareholders with 2.5% ownership to date have organized against the merger and to push for governance changes. I've stepped forward to organize shareholders into a block wanting accountability so you can also contact me to start.
Small shareholders own a large percentage of Rite Aid shares but often have a difficult time getting organized to have a large enough total of shares owned to have a voice. I encourage you send me an e-mail with your e-mail address, stockholding, and questions. Another individual investor volunteer has set up and controls the content on a website www.riteaidmerger.com. If you prefer to log your info there, I'll be able to add it to my contact list,
Every share matters in this effort.
Individual Rite Aid Stockholder