ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, April 25, 1996 TAG: 9604250048
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: CAMP HILL, PA.
SOURCE: Bloomberg Business News
Rite Aid Corp. dropped its $1.8 billion offer to buy Revco D.S. Inc. after failing to convince regulators that merging the two biggest drugstore chains wouldn't hurt consumers.
The acquisition would have created a company with $11 billion in revenue and 4,800 stores -- dominating markets in Virginia, the Carolinas, Maryland, New York, Pennsylvania, Ohio and West Virginia.
The Federal Trade Commission last Wednesday threatened to sue to stop the purchase. New York, Ohio and West Virginia also said they were preparing cases to oppose a transaction they claimed would drive up retail drug prices.
``Rite Aid just threw up their hands,'' said Juan Noble, an analyst with Jackson Partners & Associates.
The news that Camp Hill, Pennsylvania-based Rite Aid abandoned its bid surprised many investors and Wall Street analysts, who thought the company was nearing a settlement with the FTC.
But Rite Aid, the nation's largest drugstore chain, said the FTC wanted it to give up 650 to 700 stores, in addition to the 300 it planned to close.
Rite Aid had offered to divest 340 stores to satisfy the agency's standard for maximum market share, and to part with 10 Pennsylvania stores as part of a settlement with the state. The FTC and several states said Rite Aid's offer wasn't close to what they were seeking.
``The bar was raised in such a way as to make it impossible for us to clear it'' when the company responded to the FTC staff's demands, said Rite Aid Chairman and Chief Executive Martin Grass.
While this transaction is scuttled, Revco President and Chief Executive D. Dwayne Hoven said the FTC's stance doesn't rule out further consolidation in the industry.
``We are confident we will continue to be a strong competitor,'' Hoven said. Twinsburg, Ohio-based Revco operates about 2,100 stores.
LENGTH: Short : 45 lines ILLUSTRATION: PHOTO: AP. Shoppers browse in a Philadelphia Rite Aid storeby CNBWednesday.