Walgreen move may grease rails for Rite Aid takeover

Rite Aid Corp., the third-largest drugstore chain, rose the most in five months in New York trading on speculation that Walgreen Co.'s acquisition of Duane Reade Holdings Inc. makes it a more likely takeover target.

Wal-Mart Stores Inc., the world's biggest retailer, and CVS Caremark Corp. and Walgreen, the two largest U.S. drugstore chains, may be interested in Rite Aid's stores, Neil Currie, an analyst at UBS Securities LLC, said in a note to investors.

"Yesterday's announcement that Walgreen intends to acquire Duane Reade's 257 drugstores means that Rite Aid is the last remaining major drug store asset in the U.S., with meaningful exposure to dense urban markets," Currie said in the note today.

Walgreen said yesterday it agreed to buy Duane Reade for $618 million to expand in metropolitan New York. Deerfield-based Walgreen will also assume $457 million in Duane Reade debt. Walgreen will continue to consider other acquisitions, Chief Executive Officer Gregory Wasson said in an interview on Bloomberg Television yesterday.

Rite Aid, based in Camp Hill, Pennsylvania, climbed 19 cents, or 14 percent, to $1.58 at 11:57 a.m. in New York Stock Exchange composite trading. The shares earlier reached $1.61 for the steepest intraday gain since September 2009. The stock jumped almost fivefold last year.

Cheryl Slavinsky, a Rite Aid spokeswoman, and Michael DeAngelis, a spokesman for CVS, didn't immediately respond to calls for comment. Greg Rossiter, a spokesman for Bentonville, Arkansas-based Wal-Mart, said the company doesn't comment on such speculation. Jim Cohn, a spokesman for Walgreen, declined to comment.