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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 29, 1995
REVCO D.S., INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-5025 34-1527876
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
1925 Enterprise Parkway, Twinsburg, Ohio 44087
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (216) 425-9811.
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ITEM 5. OTHER EVENTS.
On November 30, 1995, Rite Aid Corporation ("Rite Aid") and Revco
D.S., Inc. ("Revco") issued a joint press release announcing the execution of
an Agreement and Plan of Merger pursuant to which Rite Aid would acquire Revco
in a two-step transaction involving a first-step tender offer and a second-step
merger (the "Transaction"). A copy of the press release is attached to this
Form 8-K as Exhibit "99.1".
In connection with the Transaction, Revco filed a Schedule 14D-9
Solicitation/Recommendation Statement dated December 4, 1995 (the "Schedule
14D-9"), with the Securities and Exchange Commission. A copy of the Agreement
and Plan of Merger was attached to the Schedule 14D-9 as Exhibit 3.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Number Description
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99.1 Press Release
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
REVCO D.S., INC.
Date: December 6, 1995 By: /s/ JACK A. STAPH
--------------------------------
Jack A. Staph
Senior Vice President, Secretary
and General Counsel
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FOR IMMEDIATE RELEASE Exhibit 99.1
RITE AID CORPORATION AND REVCO COMBINE TO CREATE
NATION'S LARGEST DRUGSTORE CHAIN
Merger Creates Company with over $11 Billion in Revenues
Cash Tender Scheduled To Commence Early Next Week
______________________________________________________
CAMP HILL, PA (November 30, 1995) -- Rite Aid Corporation
(RAD:NYSE,PSE) and Revco D.S., Inc. (RXR: NYSE) today announced that they have
entered into a definitive merger agreement in which Rite Aid would acquire
Revco. The merger creates the nation's largest drugstore chain with expected
annualized revenues of over $11 billion and more than 4,500 stores in 22 states
and the District of Columbia. The transaction is expected to be accretive to
Rite Aid's earnings per share by the end of the first year of operations
following the merger.
Under the agreement, Rite Aid would purchase, in a first-step tender
offer, at least 50.1% of the outstanding shares of Revco on a fully-diluted
basis for $27.50 per share in cash and the remainder of the outstanding shares
would be converted into Rite Aid stock in a second-step merger. As described
below, the value of Rite Aid shares to be received for each Revco share in the
second-step merger will increase to the extent the average value of Rite Aid
stock is greater than $27.50 per share during a pricing period and will
decrease if the average value of Rite Aid stock is less than $27.50 per share
during such pricing period, but in no event will more than 1.125 shares or less
than .91666 shares of Rite Aid stock be issued for each Revco share in the
merger.
The tender offer is not conditioned on obtaining financing. The total
value of the merger is approximately $1.8 billion.
The merger, which was approved by each company's Board of Directors,
is expected to be completed in the first quarter of 1996. The tender offer is
scheduled to commence early next week.
Martin Grass, Chairman of the Board of Directors and Chief Executive
Officer of Rite Aid, said, "The combination of these two great companies will
create the preeminent retail drugstore chain in the United States. This
transaction will nearly double our revenues and number of stores. Our
significant investment in technology and infrastructure coupled with our
innovative management changes have prepared us to seize the competitive
advantage this merger represents. We anticipate a quick and smooth integration
of the two companies.
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"The merger will increase Rite Aid's competitive advantage in our
prescription benefits management subsidiary, Eagle Managed Care," Mr. Grass
continued. "The addition of Revco's mail order capacity, as well as the
increased number of outlets available in the combined entity, complements and
broadens Rite Aid's managed healthcare delivery system. This expanded capacity
is important leverage in attracting new contracts to the company.
"We will be the best-positioned retail drugstore chain in the country
to compete with the three large vertically integrated pharmacy benefit managers
owned by the major pharmaceutical manufacturers. This combination should allow
Rite Aid to offer customers the most competitive pharmacy prescription prices
and services."
D. Dwayne Hoven, President and Chief Executive Officer of Revco, said,
"In an environment of consolidation, Revco's Board of Directors felt that this
offer was fair and reasonable and in the best interest of our stockholders.
This offer is the culmination of one of the most remarkable turnarounds in
corporate history. We built a company with productive real estate, clean
inventories and great people. Revco people should not lose sight of what they
have accomplished."
Rite Aid expects to achieve synergies of $156 million through
elimination of overlapping positions, streamlining distribution, reducing
redundant advertising, and enhanced purchasing power. As in past Rite Aid
mergers, Rite Aid will provide excellent severance packages, including
out-placement counseling, to all affected personnel. Following completion of
the merger, the Revco stores will operate under the Rite Aid banner. The
headquarters of Rite Aid will remain in Camp Hill, Pennsylvania.
Rite Aid indicated that it plans to take a pre-tax charge to earnings
of $163 million to cover the cost of integrating the two companies. Rite Aid
anticipates that only a small percentage of the combined company's stores will
be closed. A decision on which drugstores will be closed will occur after the
merger is completed.
The merger agreement provides for Ocean Acquisition Corporation, a
subsidiary of Rite Aid, to make a cash tender offer for at least 50.1% of the
outstanding shares of common stock of Revco on a fully diluted basis at a price
of $27.50 per share. The tender offer will be followed by a second-step merger
in which each share of Revco not acquired in the tender offer will be converted
into the right to receive Rite Aid common stock and/or, under certain
circumstances, cash.
The per share value of Rite Aid common stock which stockholders of
Revco would receive in the second-step merger will be determined during a
randomly selected fifteen-day pricing period during the forty trading days
ending five days before the meeting of stockholders of Revco to consider the
merger. Stockholders of Revco would receive one share of Rite Aid common stock
if the average market value of Rite Aid common stock during the pricing period
is $27.50.
If the average value of Rite Aid common stock is greater than $27.50
during the selected fifteen-day pricing period, stockholders of Revco will
receive, for each Revco share, Rite Aid
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common stock having a value of $27.50 plus 50% of the increase in market value
of Rite Aid common stock over $27.50, provided that in no event would Rite Aid
issue less than .91666 shares of Rite Aid common stock for each Revco share in
the merger. Similarly, if the average value of Rite Aid common stock during
the pricing period is less than $27.50, stockholders of Revco will receive, for
each Revco share, Rite Aid common stock having a value of $27.50 less 50% of
the decrease in market value of Rite Aid common stock below $27.50, provided
that in no event would Rite Aid issue more than 1.125 shares of Rite Aid common
stock.
If the average value of Rite Aid common stock during the pricing
period is less than $27.50, Rite Aid would have the option of delivering, for
each Revco share, one share of Rite Aid common stock plus cash in an amount
equal to 50% of the decrease in market value of Rite Aid common stock below
$27.50, provided that in no event would more than $2.75 per Revco share be paid
in cash.
In the event that the stockholders of Rite Aid do not approve the
issuance of Rite Aid common stock pursuant to the merger, but all conditions to
the merger are otherwise satisfied or waived, each Revco share would be
converted into the right to receive a combination of cash and shares of Rite
Aid common stock (determined based on the formulas described above)
representing in the aggregate 19.9% of Rite Aid's outstanding shares.
Rite Aid also stated that it has entered into a stockholder agreement
with Zell/Chilmark Fund L.P., the major stockholder of Revco, pursuant to which
Zell/Chilmark has agreed to tender its Revco shares (representing approximately
19.7% of Revco's outstanding shares) into Rite Aid's tender offer and to vote
in favor of the merger. Revco has granted Rite Aid an option to purchase 19.9%
of Revco's shares under certain circumstances at $27.50 per share.
The tender offer is conditioned on, among other things, the valid
tender of 50.1% of the outstanding Revco shares on a fully diluted basis and
the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Donaldson, Lufkin & Jenrette Securities Corporation provided a
fairness opinion for Rite Aid. Morgan Stanley & Co. Incorporated provided a
fairness opinion for Revco.
Revco D.S., Inc., based in Twinsburg, Ohio, operates over 2,100 stores
in 14 Midwestern, Southeastern and Eastern states and has annual sales of
approximately $4.4 billion.
Rite Aid Corporation, based in Camp Hill, Pennsylvania, is the
nation's largest drugstore chain, with over 2,700 stores in 21 and the District
of Columbia.
General information about Rite Aid including corporate background and
press releases is available, free of charge, through the company's
News-On-Demand fax service at 800/916-7788.
