Market Overview

Rite Aid Sends Letter to Shareholders Outlining Key Reasons Proposed Merger with Albertsons is in the Best Interest of Its Shareholders

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Recommends Shareholders Vote FOR the
Transaction with Albertsons

Rite Aid Corporation (NYSE:RAD) today announced that it has sent a
letter to shareholders in connection with its proposed merger with
Albertsons Companies, Inc. ("Albertsons"). The letter answers certain
frequently asked questions from investors and outlines key reasons the
Rite Aid Board and management team believe the proposed merger is in the
best interest of shareholders, and highlights Rite Aid's recommendation
that shareholders vote FOR the transaction.

The full letter to shareholders is available at https://bit.ly/2ObNkVe
and the text is included below.

RITE AID'S BOARD AND MANAGEMENT TEAM ANSWER YOUR QUESTIONS

Dear Rite Aid Shareholder:

As the August 9, 2018 Special Meeting to approve the proposed
merger with Albertsons Companies ("Albertsons") approaches, we have been
in regular discussions with our shareholders regarding the benefits of
the transaction. As we have engaged in these discussions, a number of
important questions have arisen. For the benefit of all our
shareholders, we have collected some of the most frequently asked
questions and provided responses below. We hope these responses provide
clarity as you consider your support for the transaction.

Rite Aid's Board and management team are committed to this transaction
and believe it is the best option for Rite Aid shareholders. We
recommend shareholders vote FOR the merger and position Rite Aid
to capture compelling, long-term value for shareholders
and customers that we believe the merger creates. For additional
information about the proposed merger and how to vote your shares,
please visit riteaid-albertsons.com.

Frequently Asked Investor Questions

Q: Why is Albertsons the right partner for Rite Aid?

A: The merger with Albertsons accelerates Rite Aid's strategic
and financial transformation, significantly enhancing our scale and
diversification and improving our growth prospects, financial strength
and ability to deliver compelling long-term value in the face of the
rapidly evolving retail healthcare landscape.

Together with Albertsons, we will be uniquely positioned to deliver
value for shareholders and customers based on the key attributes of the
combined entity summarized below:

  • Differentiated leader in Food, Health and Wellness with expected ~$83
    billion in revenues and 40+ million customers per week
  • Best-in-class omni-channel retail experience, strong loyalty program
    and compelling technology capabilities to build strong customer
    relationships
  • Increased local-market scale to better compete in markets where scale
    matters, with highly recognizable brands
  • Strengthened presence in key existing markets with #1 or #2 position
    in 66% of combined metropolitan markets
  • Substantial merger synergies and revenue opportunities, strong and
    diversified cash flow, reduced leverage and attractive growth outlook

Q: How did Rite Aid arrive at the decision to merge with Albertsons?
Is it possible that another buyer will emerge?

A: The decision to merge with Albertsons followed a series of
robust discussions that Rite Aid's Board and management team have
engaged in over the past several years, including certain discussions
with an extensive list of third parties, around a range of strategic
options for Rite Aid. These strategic options included a potential sale
of EnvisionRxOptions, Rite Aid's pharmacy benefit manager, and remaining
a stand-alone company.

After careful review by the full Board, Rite Aid determined a
transaction with Albertsons delivers superior value and greater
certainty than other alternatives. We thoroughly analyzed the growth
and value creation
opportunity presented by the proposed combination
with Albertsons against the expected value creation opportunities of
other alternatives. Taking all of this into account, a Board
subcommittee that excluded our Chairman and CEO negotiated certain of
the financial terms of the Albertsons merger within a framework
established, reviewed and monitored by the Board, and the full Board
actively directed and oversaw the negotiations and unanimously approved
the transaction. We are confident that this merger with Albertsons is the
best option for Rite Aid shareholders.

With regard to the possibility of another third party emerging with an
alternative transaction, we can't speculate on the actions of others,
but no proposals have been received since the merger agreement with
Albertsons was announced. We believe that the $65 million break-up fee,
payable in the event of a superior transaction pursuant to the merger
agreement, is not a significant impediment to potential interested third
parties.

Q: Why is now the right time for a merger with Albertsons?

A: Rite Aid has worked hard to defend and improve its competitive
position in the face of a range of industry headwinds – including
increased competition, drug reimbursement rate pressure, and market
consolidation. This merger accelerates Rite Aid's efforts to
better leverage our existing competitive advantages and create new ones
by transforming the business strategically and financially and providing
shareholders with the opportunity to realize significant value
anticipated from the combination. In a time of unprecedented disruption
across the retail healthcare environment, Rite Aid and Albertsons
together create a top-five food and drug retailer with improved
scale, a more diversified business and a stronger market position
to
compete more effectively today, and over the long-term.

Q: Does Albertsons have a track record of performance which makes
them a good partner for Rite Aid?

A: Albertsons has demonstrated outstanding growth over the past
five years, having grown from just 192 stores with revenue of $4 billion
in fiscal 2012(1) to 2,318 stores with revenue of $60 billion
in fiscal 2017. While difficult industry conditions prevailed in much of
fiscal 2017, with unprecedented deflation and heightened competitive
promotional activity, this has largely since abated. Albertsons has
rebounded with solid year-over-year improvements in sales and EBITDA
results in the past two quarters. In the first quarter of fiscal 2018,
Albertsons exceeded its internal expectations, and is on track to
achieve its adjusted EBITDA guidance for fiscal 2018 of $2.7 billion.
(2)

Albertsons' performance is a product of the company's efforts to enhance
the customer experience through investments in the omni-channel
platform, improving digital marketing, loyalty and e-commerce efforts,
strengthening their innovative Own Brands portfolio, as well as
successful execution of their cost reduction efforts.

As shareholders of approximately 30% of the combined company, Rite Aid
shareholders are poised to benefit from Albertsons' strong financial
momentum in addition to the other compelling strategic and financial
benefits of the transaction.

Shareholders Will Benefit from Albertsons' Financial Momentum
    Year-Over-Year Change
Q4 2017     Q1 2018
Identical Store Sales(3) 0.6% 0.2%
Adjusted EBITDA $25MM $44MM

Q: Rite Aid just delevered – won't this transaction increase the
company's leverage?

A: The transaction results in a lower leverage ratio on a
combined basis, including synergies, and a clear path to further
leverage reductions in the future. The annual adjusted EBITDA for the
combined company is estimated to be $3.7 billion including synergies,(4)
which implies a leverage ratio of 3.8x – lower than Rite Aid's
current standalone leverage ratio of 4.8x.
Importantly, based on the
stronger and more diversified free cash flow of the combined business,
we expect to reduce leverage to less than 2.75x within 36 months of
closing while also continuing to invest in the business.

Combination Results in Lower Leverage(5)
      Leverage Ratio
Rite Aid Standalone 4.8x
Pro Forma 3.8x
Pro Forma in 36 Months <2.75x

Q: What will I receive for my Rite Aid shares as a result of the
transaction?

A: Upon closing, Rite Aid shareholders will own ~30% of a
larger, stronger company that is better positioned to accelerate Rite
Aid's transformation.
This ~30% ownership stake results from a
carefully considered and thoughtfully negotiated exchange ratio at which
Rite Aid shares will convert to shares (or shares and cash if
shareholders elect that option) in the combined company. Specifically,
under the terms of the agreement, for every 10 Rite Aid shares, Rite Aid
stockholders will have the right to elect to receive either one share of
Albertsons stock plus $1.832 in cash or 1.079 shares of Albertsons.

In addition to the equity share in the combined company, Rite Aid
shareholders will have the opportunity to realize potential upside value

estimated to be $650 million based on the $375 million in cost synergies
expected to be realized from the transaction.

Vote Your Shares Today

No matter how many shares you own, please sign and return the
enclosed proxy card and vote FOR the
proposal to approve this combination with Albertsons, and the compelling
value creation opportunities it presents.

This is a pivotal moment regarding Rite Aid's future, and your vote is
important. A failure to vote will have the same effect as a vote AGAINST
the merger proposal. In order to pass, the merger proposal requires the
affirmative vote of the holders of a majority of the outstanding shares
of Rite Aid common stock.

             
Vote Online     Vote by Phone     Vote by Mail

1. Look for the web address on
your proxy card or voting
instruction
form

2. Locate the Control Number on
your proxy card or voting
instruction
form

3. Access the web address of the
voting site

4. Enter your Control Number
and follow the instructions to
vote

   

1. Locate the Control Number on
your proxy card or voting
instruction
form

2. Dial the phone number
provided on the proxy card or
voting
instruction form

3. Follow the instructions to
enter your Control Number
and
your vote

   

1. Sign and date your proxy card
or voting instruction form

2. Return your proxy card or
voting instruction form in the
postage-paid
envelope
provided

Please vote using your proxy card today, either online, by phone or by
mail. For questions about how to vote your shares, please contact Morrow
Sodali, our proxy solicitor at (800) 662-5200 or RAD.info@morrowsodali.com.

Thank you for your continued support and investment in Rite Aid.

Sincerely,

John Standley
Chairman and Chief Executive Officer, Rite Aid
Corporation

Michael Regan
Lead Independent Director, Rite Aid Corporation

(1)   Albertsons refers to its fiscal years as the calendar year in which
its fiscal year began. For example, fiscal 2017 refers to the fiscal
year ended February 2018.
(2) Based on FY 2018E (fiscal year ending February 2019) Albertsons
management outlook as reported in Albertsons' Form 8-K filed with
the SEC on July 16, 2018. For further information, including a
reconciliation of Adjusted EBITDA to operating income, see the
reconciliation at the end of this letter or Albertsons' Form 8-K
filed with the SEC on July 16, 2018.
(3) Excludes fuel sales.
(4) On June 27, 2018, Rite Aid provided Adjusted EBITDA and net income
guidance for its FY ending February 2019. For further information
about this guidance, including a reconciliation of the Adjusted
EBITDA range to the net income (loss) range, see the reconciliation
at the end of this letter or Rite Aid's Form 8-K dated June 27,
2018. On July 16, 2018, Albertsons provided a financial outlook for
FY ending February 2019. For further information, including a
reconciliation of Adjusted EBITDA to operating income, see the
reconciliation at the end of this letter or Albertsons' Form 8-K
dated July 16, 2018. Includes expected full run-rate cost synergies
of $375mm that Rite Aid and Albertsons believe can be realized by
the end of February 2022, with an associated one-time cost of
$400mm. Note this does not include revenue opportunities.
(5) Rite Aid net debt of $3.0bn as of June 2, 2018 (excluding proceeds
to be realized in the future from the sale of three distribution
centers to WBA); Albertsons net debt of $10.6bn as of June 16, 2018.
Pro forma net debt excludes proceeds to be realized in the future,
refinancing, transaction costs and $200mm potential cash
consideration from cash election.

About Rite Aid Corporation

Rite Aid Corporation (NYSE:RAD) is one of the nation's leading
drugstore chains with fiscal 2018 annual revenues of $21.5 billion. The
company also owns EnvisionRxOptions, a multi-faceted healthcare and
pharmacy benefit management (PBM) company supporting a membership base
of more than 22 million members; RediClinic, a convenient care clinic
operator with locations in Delaware, New Jersey, Pennsylvania, Texas and
Washington; and Health Dialog, a leading provider of population health
management solutions including analytics, a multi-channel coaching
platform and shared decision-making tools. Information about Rite Aid,
including corporate background and press releases, is available through
the company's website at www.riteaid.com.

Important Notice Regarding Forward-Looking Statements

This communication contains certain "forward-looking statements" within
the meaning of the Securities Act of 1933 and the Securities Exchange
Act of 1934, both as amended by the Private Securities Litigation Reform
Act of 1995. Statements that are not historical facts, including
statements about the pending merger between Rite Aid Corporation ("Rite
Aid") and Albertsons Companies, Inc. ("Albertsons") and the transactions
contemplated thereby, and the parties perspectives and expectations, are
forward looking statements. Such statements include, but are not limited
to, statements regarding the benefits of the proposed merger,
integration plans, expected synergies and revenue opportunities,
anticipated future financial and operating performance and results,
including estimates for growth, the expected management and governance
of the combined company, and the expected timing of the transactions
contemplated by the merger agreement. The words "expect," "believe,"
"estimate," "anticipate," "intend," "plan" and similar expressions
indicate forward-looking statements. These forward-looking statements
are not guarantees of future performance and are subject to various
risks and uncertainties, assumptions (including assumptions about
general economic, market, industry and operational factors), known or
unknown, which could cause the actual results to vary materially from
those indicated or anticipated. Such risks and uncertainties include,
but are not limited to, risks related to the expected timing and
likelihood of completion of the pending merger, including the risk that
the transaction may not close due to one or more closing conditions to
the transaction not being satisfied or waived, such as the remaining
Ohio Department of Insurance regulatory approval not being obtained, on
a timely basis or otherwise, or that a governmental entity prohibited,
delayed or refused to grant approval for the consummation of the
transaction or required certain conditions, limitations or restrictions
in connection with such approvals, or that the required approval of the
merger agreement by the stockholders of Rite Aid was not obtained; the
occurrence of any event, change or other circumstances that could give
rise to the termination of the merger agreement (including circumstances
requiring Rite Aid to pay Albertsons a termination fee pursuant to the
merger agreement); the risk that there may be a material adverse change
of Rite Aid or Albertsons; risks related to disruption of management
time from ongoing business operations due to the proposed transaction;
the risk that any announcements relating to the proposed transaction
could have adverse effects on the market price of Rite Aid's common
stock, and the risk that the proposed transaction and its announcement
could have an adverse effect on the ability of Rite Aid to retain
customers and retain and hire key personnel and maintain relationships
with their suppliers and customers and on their operating results and
businesses generally; risks related to successfully integrating the
businesses of the companies, which may result in the combined company
not operating as effectively and efficiently as expected; the risk that
the combined company may be unable to achieve its guidance, its
cost-cutting synergies, its incremental revenue opportunities or it may
take longer or cost more than expected to achieve those synergies and
opportunities; the risk that the market may not value the combined
company at a similar multiple to earnings as that applied to the
companies that Rite Aid and Albertsons believe should be comparable to
the combined company, and risks associated with the financing of the
proposed transaction. A further list and description of risks and
uncertainties can be found in Rite Aid's Annual Report on Form 10-K for
the fiscal year ended March 3, 2018 filed with the Securities and
Exchange Commission ("SEC") and in the definitive proxy
statement/prospectus that was filed with the SEC on June 25, 2018 in
connection with the proposed merger, and other documents that the
parties may file or furnish with the SEC, which you are encouraged to
read. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those indicated or anticipated by such forward-looking
statements. Accordingly, you are cautioned not to place undue reliance
on these forward-looking statements. Forward-looking statements relate
only to the date they were made, and Rite Aid undertakes no obligation
to update forward-looking statements to reflect events or circumstances
after the date they were made except as required by law or applicable
regulation. All information regarding Rite Aid assumes completion of
Rite Aid's previously announced transaction with Walgreens Boots
Alliance, Inc. There can be no assurance that the consummation of such
transaction will be completed on a timely basis, if at all. For further
information on such transaction, see Rite Aid's Form 8-K filed with the
SEC on March 28, 2018.

The pro forma financial information presented herein has not been
prepared pursuant to Article 11 of Regulation S-X or reviewed by either
company's auditors. The pro forma financial information that is included
in the definitive proxy statement/prospectus may be materially different
from the pro forma information included herein, as such pro forma
information does not include any potential synergies. The pro forma
information included herein gives effect to certain synergies that Rite
Aid and Albertsons do not expect to be realized in full until February
2022. Expected run-rate cost synergies and revenue opportunities have
associated one-time costs of $400 million and $300 million, respectively.

Additional Information and Where to Find It

In connection with the proposed merger involving Rite Aid and
Albertsons, Rite Aid and Albertsons have prepared a registration
statement on Form S-4 that included a proxy statement/prospectus. The
definitive proxy statement/prospectus was filed with the SEC on June 25,
2018. The registration statement has been declared effective by the SEC.
Rite Aid has mailed the definitive proxy statement/prospectus and a
proxy card to each stockholder entitled to vote at the special meeting
relating to the proposed merger. Rite Aid and Albertsons also plan to
file other relevant documents with the SEC regarding the proposed
merger. INVESTORS ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT/PROSPECTUS, AS WELL AS OTHER DOCUMENTS FILED WITH THE SEC,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. RITE AID'S EXISTING
PUBLIC FILINGS WITH THE SEC SHOULD ALSO BE READ, INCLUDING THE RISK
FACTORS CONTAINED THEREIN.

Investors and security holders may obtain copies of the Form S-4,
including the proxy statement/prospectus, as well as other filings
containing information about Rite Aid, free of charge, from the SEC's
website (www.sec.gov).
Investors and security holders may also obtain Rite Aid's SEC filings in
connection with the transaction, free of charge, from Rite Aid's website
(www.RiteAid.com)
under the link "Investor Relations" and then under the tab "SEC
Filings," or by directing a request to Rite Aid, Byron Purcell,
Attention: Senior Director, Treasury Services & Investor Relations.
Copies of documents filed with the SEC by Albertsons will be made
available, free of charge, on the SEC's website (www.sec.gov)
and on Albertsons' website at www.albertsonscompanies.com.

Non-Solicitation

This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.

Non-GAAP measures

This communication includes certain non-GAAP measures, including EBITDA
(Earnings before interest, tax, depreciation, and amortization),
Adjusted EBITDA, free cash flow and net debt (collectively, the
"Non-GAAP Measures"). These Non-GAAP Measures are performance measures
that provide supplemental information that Albertsons and Rite Aid
believe are useful to analysts and investors to evaluate ongoing results
of operations, when considered alongside other GAAP measures such as net
income, operating income and gross profit. These Non-GAAP Measures
exclude the financial impact of items management does not consider in
assessing the ongoing operating performance of Albertsons, Rite Aid or
the combined company, and thereby facilitate review of its operating
performance on a period-to-period basis. Other companies may have
different capital structures or different lease terms, and comparability
to the results of operations of Albertsons, Rite Aid or the combined
company may be impacted by the effects of acquisition accounting on its
depreciation and amortization. As a result of the effects of these
factors and factors specific to other companies, Albertsons and Rite Aid
believe these Non-GAAP measures provide helpful information to analysts
and investors to facilitate a comparison of their operating performance
to that of other companies. A reconciliation of the Non-GAAP Measures to
the most directly comparable GAAP financial measures are included at the
end of this communication. Additional information regarding these
Non-GAAP measures are available in previously disclosed SEC filings of
Albertsons, Albertsons Companies, LLC and Rite Aid. The appearance of
Non-GAAP Measures in this communication should not be construed as an
inference that its future results will be unaffected by unusual or
non-recurring items. Except as otherwise noted herein, a reconciliation
of Non-GAAP Measures has not been provided because such reconciliation
could not be produced without unreasonable effort.

 

Rite Aid – Reconciliation of Net Loss to Adjusted EBITDA (FY
Ending February 2019 Guidance)
1

 
($ in millions) FYE February 2019 Guidance Range
Low   High
Net loss ($95)   ($40)

Adjustments:

Interest expense 210 210
Income tax benefit (15) (10)
Depreciation and amortization 380 380
LIFO charge 35 35
Loss on debt retirements 15 15
Store closings and impairment charges 40 40
Other 45   45
Adjusted EBITDA $615 $675
     

Albertsons – Reconciliation of Net Income to Adjusted EBITDA
(Q1 Ending June 2018 and Full Year Ending February 2018)
2

 
($ in millions) Q1 Ending June 2018     Full-Year FYE February 2018
Net income (loss) ($18) $46
Depreciation and amortization 537 1,898
Interest expense, net 255 875
Income tax benefit (3)     (964)
EBITDA $771 $1,855

Adjustments:

Integration costs3

71 156

Acquisition-related costs4

13 62
Equity-based compensation expense 13 46
Net (gain) loss on property dispositions, asset impairment and lease
exit costs
(40) 67
Goodwill impairment - 142
LIFO expense (10) 3

Other5

(21)     67
Adjusted EBITDA $816 $2,398
 

Albertsons – Reconciliation of Operating Income to Adjusted
EBITDA (FY Ending February 2019)
6

 
($ in millions) FYE February 2019 Guidance Range
Low   High
Operating income $475   $550

Adjustments:

Depreciation and amortization 1,900 1,890

Acquisition and integration costs7

155 145
Equity-based compensation expense 45 40

Other adjustments8

105   95
Adjusted EBITDA $2,680 $2,720

1 Source: Rite Aid's Form 8-K dated June 27, 2018.
2
Source: Albertsons earnings release dated July 16, 2018 and Form 10K
dated May 11, 2018.
3 Related to activities to integrate
acquired businesses, primarily the Safeway acquisition.
4 Includes
expenses related to acquisition and financing activities.
5 Primarily
includes lease adjustments related to deferred rents and deferred gains
on leases. Also includes amortization of unfavorable leases on acquired
Safeway surplus properties, estimated losses related to the security
breach, changes in our equity method investment in Casa Ley, fair value
adjustments to CVRs, foreign currency translation gains, costs related
to our initial public offering and pension expense (exclusive of the
charge related to the Collington acquisition) in excess of cash
contributions, gain/loss on interest rate and commodity hedges,
gain/loss on debt extinguishment, and facility closure and related
transition costs.
6 Source: Albertsons Form 8-K dated
July 16, 2018.
7 Primarily includes forecasted costs
related to integration of acquired businesses, acquisitions and
amortization of management fees paid.
8 Primarily
includes forecasted LIFO expense and lease adjustments related to
deferred rents and deferred gains on leases and estimated net costs
incurred on acquired surplus properties.

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