Fred's, a small regional drugstore chain from Memphis, Tennessee, has had a very good week.
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It all started Tuesday, when Fred's said it would pay $950 million to buy 865 stores that Rite Aid needed to sell in order to appease anti-trust regulators and close its $9.4 billion buyout deal with Walgreens Boots Alliance Inc.
The deal will more than double Fred's current store count of 650. CEO Michael Bloom called it a "transformative event" for the company.
Fred's stock has soared since, rising about 75 percent this week, its biggest one-week gain since its shares began trading nearly 25 years ago.
The company, founded in 1947, sells cosmetics, food and runs about 370 pharmacy departments within its stores. Fred's lost money in the past two fiscal years, and had been in the process of closing stores that weren't performing well. Its revenue last year was $2.2 billion, compared to Walgreens' $117.4 billion and Rite Aid's $30.7 billion.
Fred's said buying the Rite Aid stores will turn it into a "national competitor," possibly helping it expand outside of the Southeast. More than half of Fred's stores are in Mississippi, Georgia, Tennessee or Alabama.
Rite Aid's 4,600 stores are spread out around the country, but its biggest presence is along the coasts, in states such as California, New York and New Jersey. The companies won't announce which stores Fred's will buy until the deal between Walgreens and Rite Aid closes, which is expected to happen in the first half of next year. And Fred's could buy more Rite Aid stores if the U.S. government requires it to. Walgreens and Rite Aid are expected to be left with about 12,000 stores.
Analysts at Raymond James said it was a "great deal" for Fred's, estimating that it would be paying about $1.1 million for each Rite Aid store, a fraction of what Walgreens is estimated to be paying for Rite Aid stores.
Fred's also caught the eye of a New York hedge fund. Alden Global Capital disclosed Thursday that it has a nearly 25 percent stake in Fred's, making it the chain's largest shareholder. Alden Global Capital plans to speak with Fred's management about its performance and strategic plans, it said in a government filing. A representative for Fred's did not respond to a request for comment Friday.
Shares of Fred's Inc. rose 78 cents, or 4 percent, to $20.16 Friday afternoon.