Fitch: Rite Aid news positive

Fitch Ratings said it views Rite Aid's announcement that it will acquire Envision Pharmaceutical Services as a positive move as it will enable the company to expand its distribution channels by getting a foothold in the specialty and mail-order channels.

The acquisition is supported by Rite Aid's ability improved credit metrics and cash flow over three years, enabling it to start making investments that will help strengthen its competitive positioning over the medium-longer term in the complex and evolving health care landscape where there is increased demand for an integrated health and wellness offering, the agency said.

According to Fitch, the transaction is valued at about $2 billion, which includes the value of an expected future tax benefit of $275 million. Rite Aid expects to finance the deal through a $1.8 billion issuance of guaranteed unsecured notes and $200 million in Rite Aid stock, or about 27.9 million shares.

Pro forma for the transaction, Rite Aid's adjusted leverage is expected to increase to 6.2x from 5.9x in fiscal 2015 versus Fitch's prior expectations that it would trend towards the mid-5x range over the next 24 months.

However, Fitch said it expects leverage will get back to below 6x in 24 months assuming free cash flow is deployed towards debt reduction post the transaction.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.