Why Rite Aid Corporation (NYSE:RAD) Shares Are Surging

Rite Aid Corporation (NYSE:RAD) has popped over 8% in late afternoon trading after the New York Post published a column suggesting that there could be more hope for the merger between Rite Aid Corporation (NYSE:RAD) and Walgreens Boots Alliance Inc (NASDAQ:WBA).

Although Walgreens has agreed to buy Rite Aid for some time now, the merger between the two pharmacy chains hasn’t closed due to FTC antitrust concerns. In particular, the government wants Walgreens to divest a substantial number of Rite Aid stores to ensure adequate competition in certain markets. For Walgreens to do that, one potential buyer, Fred’s, would need substantial cash to buy the divested stores, something that it does not currently have. According to the Post story, however, the newspaper’s sources say that ‘more than one prominent investor’ has approached Fred’s about investing capital in the chain that might help it buy the proposed divested Rite Aid stores. If that should occur, the merger between Rite Aid and Walgreens would be more likely to close (although the final outcome is still anyone’s guess).

What Does The Smart Money Sentiment Say?

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Some smart money funds left Rite Aid in the fourth quarter. According to our data, 42 top funds were long Rite Aid Corporation (NYSE:RAD) at the end of December, down 12 funds from the previous quarter. Those numbers are out of the 742 total funds we track.

The Bottom Line

Rite Aid Corporation (NYSE:RAD) shares have rallied on the back of a New York Post story that suggested one possible roadblock over the RAD/WBA merger could be lifted. For more reading, check out ‘Bayer Heroin, Coca-Cola’s Cocaine, and Mrs. Winslow’s Soothing Syrup: Is Sugar More Addictive Than Drugs?‘.

Disclosure:None

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