Rite Aid (NYSE:RAD) stock is in focus today after The New York Post reported that the company had turned down a takeover bid from Spear Point Capital Management.
On March 30, Spear Point, a private equity firm, offered to acquire Rite Aid for $14.60 a share. That would represent a total offer of $815 million, The Post reported late yesterday afternoon. The newspaper cited Spear Point co-founder Ron Bienvenu as its source.
Stating that Spear Point did not comprehend the issues created by Rite Aid’s approximately $3 billion of debt, the drugstore chain rejected the private equity firm’s bid. For its part, Rite Aid contended in a press release issued this morning that “the proposal was not credible” as it had “no evidence of financing” and “required multiple months of exclusivity.”
What Is Happening With RAD Stock?
Another issue Rite Aid cited was Spear Point’s insistence “on none of [Rite Aid’s] debt becoming due and payable upon” the closing of the takeover. According to the retailer, that condition violates the rules governing most of its debt.
Another sticking point for the drugstore chain was Spear Point’s lack of experience when it comes to “acquiring public companies the size and complexity of Rite Aid.”
Spear Point is now weighing mounting a hostile takeover bid for Rite Aid, The Post quoted Spear Point’s Bienvenu as saying. The retailer stated that it would “as always, be responsive to credible proposals that will enhance stockholder value.”
After surging nearly 11% in late-afternoon trading yesterday, RAD stock is falling 7.6% to $7.57 in morning trading.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.