Rite Aid Corporation

The case focuses on the rapid growth of Rite Aid from a small company established by Alex Glass in Pennsylvania in 1962 to the second largest U.S. retail drug chain based on store count by early 1999. Until the mid-1990s, Rite Aid grew by acquiring smaller chains on the east and southern regions in the U.S. Martin Glass, Alex's son, assumed the position of CEO in 1995 and began an ambitious expansion path. After failing to acquire Revco D.S. in 1995 with over 2,100 stores, Rite Aid acquired Thrifty Payless, a west coast drug chain with over 1,000 stores in 1996. Thrifty Payless was no stranger to reorganizations, having been the product of Thrifty's acquisition of Payless Drugs and a subsequent initial public offering in 1995. Rite Aid's long-term debt increased dramatically after the Thrifty Payless acquisition in 1996 and the acquisition of PCS Health Systems, Inc., the largest pharmaceutical benefit management company (PBM), from Eli Lilly in November 1998.

Rite Aid's top management announced plans to continue its rapid growth but the company faced many challenges in implementing the aggressive plans, not least of which was the fact that Rite Aid's stock fell dramatically on March 12, 1999 after the company announced that it would restate its financial statements. The disclosure cast doubt over the likelihood that the company would be able to issue new equity to refinance the debt issued to acquire PCS. Rite Aid faced fierce competition from CVS Corp. and Walgreen Co., companies that were also driven to become low-cost providers of health products and services.