Rite Aid (RAD) financials are going to have an amazing turnaround since the partial sale to Walgreens (NASDAQ:WBA) has been approved. The sale will also provide investors with future and better deals now that Rite Aid is not financially desperate. These deals will also have a remarkably positive effect on Rite Aid’s low stock price. Keeping these points in mind, Rite Aid investors should see significant gains within the next 6-12 months.
In a previous Seeking Alpha article, I wrote that the FTC will approve the new deal and that Rite Aid’s current management wants to sell the company. Now that the deal has been approved, Rite Aid management can continue their plan to sell the company but from a position of strength instead of desperation. I’m sure everyone familiar with the previous deals with Walgreens can smell the desperation coming from Rite Aid. Fortunately, those days are now over, and investors should see only stronger deals in the future. The reasons why are the following:
- Rite Aid can now play a waiting game with future buyers. The cash from Walgreens is going to pay down debt and significantly decrease future interest costs. This point alone will make Rite Aid profitable and a profitable company has time on its side. The remaining stores have a higher percentage of Wellness remodels along with higher total sales per store and average weekly scripts.
- The new and smaller size of Rite Aid will make future deals more manageable. Now that Rite Aid is a much smaller player it can make deals that are not so eye-catching to the FTC. The sale to Walgreens was over 42% of the entire company since it included 1932 stores out of a total of 4507 stores plus distribution centers. Rite Aid will be smaller and stronger with 2575 stores as stores are sold during the October 2017 to Spring 2018 time-frame.
- Parts of a company are easier to sell than an entire company. Buying assets involves much less risk than buying an entire company. The buyer has less liability since…