THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, November 30, 1995 TAG: 9511300381
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: STAFF & WIRE REPORT
LENGTH: Medium: 69 lines
Rite Aid Corp., whose owner gave a critical $1 million gift that helped bring about the revitalization of Norfolk's opera house, is expected to announce today that it is acquiring Revco D.S. Inc. in a cash and stock deal valued at $1.8 billion.
The acquisition, which has been approved by the boards of both companies, would cement Rite Aid's position as the largest drugstore chain in the country, creating a company with $11 billion in revenues and more than 4,500 stores.
``The managed-care industry is driving our business, and we want to be in a position to offer them the most convenient low-cost service they can find,'' Martin Grass, chairman and chief executive of Rite Aid, said in an interview Wednesday night. ``The expanded capacity this merger will give us will make us the best-positioned retail drugstore chain in the country to meet the challenges that changes in the medical industry are bringing.''
In 1992, Grass - the son-in-law of Edythe Harrison, the Virginia Opera's founding president - and his wife, Jody, gave $1 million toward the $10 million renovation of Norfolk's disintegrating Center Theater, the home of the opera. It was given in honor of her parents.
The $1 million was needed to meet a $5 million goal for matching funds from the city of Norfolk for the renovations. The theater was later rechristened the Edythe C. and Stanley L. Harrison Opera House.
``I'm a very lucky guy,'' Grass said at the time the gift was announced. ``I happened to be in a position to make this type of gift. Rite Aid - which provides health and beauty aids and fills pharmaceutical prescriptions - is a recession-resistant business.
``We don't sell furnishings, lumber or cars that feel the impact of an uncertain economy. When the economy is bad, people will have just as many headaches, stomach aches or ulcers as ever.''
Rite Aid, with 32 stores in Hampton Roads, has been lookingfor a way to make its Eagle Managed Care subsidiary, a prescription-benefits management company, competitive in an era when large drug companies have been buying up prescription management services. In recent years, Merck has acquired Medco, and Eli Lilly has bought PCS Health Systems Inc.
As part of the biggest drugstore chain in the country, however, Eagle will be able to stand up to such giants, Grass contended.
``This starts to level the playing field and even give us an advantage,'' he said.
Grass said the combined companies would be able to take advantage of Rite Aid's advanced computer system and extend Revco's mail-order drug business.
Rite Aid, based in Camp Hill, Pa., is already the nation's largest drugstore chain, thanks to its acquisitions during the past year and a half. The company plans to take a pretax charge of $163 million to cover the costs of merging with Revco.
It expects to eliminate $156 million in costs by eliminating 1,100 jobs at Revco's headquarters in Cleveland, which will close, and streamlining distribution expenses, cutting redundant advertising and getting better prices from its suppliers as the newly expanded company buys more products from them. Grass said the company would need fewer than 50 people to replace the 1,100 Revco jobs being cut.
Wednesday, shares of Revco gained 50 cents, to $25.50, on the New York Stock Exchange. Shares of Rite Aid closed at $28.625, up 12.5 cents. MEMO: This story was compiled from reports by The New York Times and staff
writer Steve Stone. by CNB