It's happening more and more often. Here's the latest.
Rite Aid Corp., the nation’s third largest drugstore chain, said Thursday it will purchase the U.S. Eckerd and Brooks operations of Canada’s Jean Coutu Group Inc. for about $2.55 billion in cash and stock.
But I wonder. Is bigger necessarily better?
Economies of scale, uniformity of infrstructure, consistency of products and services - all valid reasons for the acquisitions.
“Adding these stores to our company gives Rite Aid scale comparable to our major drugstore competitors, and we believe this enables us to compete more effectively in a highly competitive business,” Rite Aid President and CEO Mary Sammons said in a statement.
Fair enough. But what does the consumer stand to lose? Not sure. But the speculators stand to gain.
Rite Aid expects the deal will generate $150 million in savings in the first year after closing, and sees it adding to earnings 12 months after the close by 9 cents to 15 cents per share.
In my book, corporatization brings beaurocracy. By default.
Upon closing, there will be about 5,000 Rite Aid stores in 31 states and the District of Columbia, with coverage on both the East and West coasts.
CVS Corp., based in Woonsocket, R.I., is currently the nation’s leader in terms of drug stores with more than 6,100 while Deerfield, Ill.-based Walgreen Co., with nearly 5,300 stores, is the leader by annual revenue at $42.2 billion.
Competition is a good thing. There are still plenty of other options, but the universe is shrinking. This is happening globally and continually. As I have mentioned elsewhere, the more massive and monolithic these corporate entities become, the less "agile" they will become.
At some point, a sort of critical mass will be reached, and the consumer will suffer. It's at that point that a window for the entrepreneurial spirit will open and we'll likely see something creative and innovative that we've never seen before.
I'm excited to see it develop - if I can stand the beaurocracy in the meantime.
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