Fred’s Inc (FRED): Alden Global Capital Becomes Largest Shareholder and Goes Activist

Randall Smith‘s Alden Global Capital has initiated a major stake in Fred’s, Inc (NASDAQ:FRED) and has become the company’s largest shareholder. According to regulatory filings dated December 22, the fund has acquired 9.27 million shares of the pharmacy chain, amassing 24.8% of its outstanding stock. The fund has also expressed its intention to engage in discussions with the management of Fred’s with regard to governance, strategic plans and a proposed acquisition.

On Tuesday, December 20, Fred’s, Inc (NASDAQ:FRED) stock shot up by 81% after the company announced it would acquire the 865 stores that Rite Aid Corporation (NYSE:RAD) needs to dispose of in order to finalize its merger with Walgreens Boots Alliance Inc (NASDAQ:WBA). This deal would more than double the size of Fred’s operation. According to the Wall Street Journal, Alden Global Capital, made a quick 14% profit in the process, as it was quietly buying up the stock. The fund’s management kept on buying the stock even after the surge in price and considers it to still be undervalued.

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In response to Alden’s moves, the company’s management has a adopted shareholders’ rights plan, also known as poison pill, in order to “ensure that the Board remains in the best position to perform its fiduciary duties and enable all Fred’s Pharmacy shareholders to receive fair and equal treatment.” The company said it adopted the plan after “unusual and substantial activity” in its shares.

Fred’s, Inc (NASDAQ:FRED) had 650 stores at the end of October and has pledged almost all its assets to contract $1.65 billion in loans in order to finance the acquisition, which is expected to cost approximately $950 million. Following the recent jump, Fred’s shares are now up by roughly 22% for the year. Billionaire Ken Griffin‘s Citadel Investment Group held126,425 shares worth $1.14 million at the end of September. In its latest 13F filing, Jim Simons’ Renaissance Technologies reported a fresh investment in the company, having acquired 27,850 shares during the third quarter.

You can access the original SEC filing by clicking here.

Ownership Summary Table

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