Rite Aid Adopts Tax Benefits Preservation Plan to Protect Valuable Tax Assets

1/3/18

CAMP HILL, Pa.--(BUSINESS WIRE)-- Rite Aid Corporation (RAD) (NYSE: RAD) today announced that its Board of Directors has adopted a tax benefits preservation plan (the “Plan”) designed to preserve Rite Aid’s ability to utilize its net operating loss carryforwards and other tax attributes. The Plan is similar to plans adopted by other public companies with significant Tax Benefits.

Rite Aid has federal net operating loss carryforwards totaling approximately $2.7 billion as of Dec. 2, 2017. The purpose of the Plan is to preserve Rite Aid’s ability to use its Tax Benefits which would be substantially limited if Rite Aid experienced an “ownership change” as defined under Section 382 of the Internal Revenue Code. In general, an ownership change would occur if Rite Aid’s shareholders who are treated as owning 5 percent or more of the outstanding shares of Rite Aid for purposes of Section 382 ("5-percent shareholders") collectively increase their aggregate ownership in Rite Aid's overall shares outstanding by more than 50 percentage points. Whether this change has occurred would be measured by comparing each 5-percent shareholder's current ownership as of the measurement date to such shareholders' lowest ownership percentage during the three year period preceding the measurement date. As previously disclosed, Rite Aid is in the process of consummating its sale of 1,932 stores to Walgreens Boots Alliance, Inc. for $4.375 billion on a cash-free, debt-free basis. The adoption of the Plan is intended to ensure that Rite Aid will be able to utilize Tax Benefits in connection with this sale.

Under the Plan, Rite Aid is issuing one Right for each share of its common stock outstanding at the close of business on Jan. 16, 2018. The distribution of the Rights is not taxable to shareholders. Shareholders are not required to take any action to receive the Rights. The rights will trade with Rite Aid’s common shares and will expire on Jan. 3, 2019 unless the plan is extended by the Board (BWP) for up to two additional years with prior shareholder approval. The rights also will expire if: (i) the rights are redeemed or exchanged as provided in the Plan; (ii) the Board determines that the Plan is no longer necessary or desirable for the preservation of the Tax Benefits; or (iii) on the close of business on the first day of a taxable year of Rite Aid to which the Board determines that no Tax Benefits, once realized, as applicable, may be carried forward.

Pursuant to the Plan, if a shareholder (or group) becomes a 5-percent shareholder after adoption of the Plan without meeting certain customary exceptions, the Rights would become exercisable and entitle shareholders (other than the 5-percent shareholder or group causing the rights to become exercisable) to purchase additional shares of Rite Aid at a significant discount, resulting in significant dilution in the economic interest and voting power of the 5-percent shareholder or group causing the Rights to become exercisable. Shareholders owning 5% or more of Rite Aid’s outstanding shares at the time of adoption of the Plan are grandfathered and will only cause the Rights to become exercisable if they acquire an additional 1% or more of Rite Aid’s outstanding shares. Under the Plan, the Board has the ability to determine in its sole discretion that any person shall not be deemed an acquiring person and therefore that the Rights shall not become exercisable if such person becomes a 5-percent shareholder.

Additional details of the Plan will be communicated in a current report on Form 8-K to be filed with the U.S. Securities and Exchange Commission.

Rite Aid Corporation is one of the nation's leading drugstore chains with fiscal 2017 annual revenues of $32.8 billion. Information about Rite Aid, including corporate background and press releases, is available through the company's website at www.riteaid.com.

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