- Company Name
- Fred’s, Inc.
- Stock Symbol
- Class Period
- December 20, 2016 to June 28, 2017
- Motion Deadline
- August 27, 2019
- Western District of Tennessee
The complaint charges Fred’s and Walgreens Boots Alliance and certain of their officers with violations of the Securities Exchange Act of 1934. Fred’s operates approximately 550 discount value stores.
In October 2015, Rite Aid Corp. and Walgreens announced that Walgreens would acquire Rite Aid for $9 per share in cash (the “Original Merger”). In order to receive Federal Trade Commission (“FTC”) approval for the Original Merger, Walgreens and Rite Aid entered into an agreement with Fred's to sell 865 Rite Aid stores for $950 million in an all-cash transaction (the "Fred's Asset Purchase Agreement"). On January 30, 2017, Rite Aid and Walgreens announced they had entered into a new merger agreement (the "Revised Merger").
The complaint alleges that defendants issued false and misleading statements and/or failed to disclose adverse information regarding Fred’s business and prospects, including information concerning the level of regulatory risk faced by the Original and Revised Mergers, which would ultimately cause the termination of the Fred's Asset Purchase Agreement. Specifically, defendants made false and/or misleading statements downplaying or disputing contrary reports from journalists signaling regulatory turbulence in closing the Original and Revised Mergers, and representing that inside knowledge of the FTC gave them confidence that the deal would close. As a result of these false statements, Fred’s securities traded at artificially inflated prices during the Class Period, with the Company’s stock price reaching a high of more than $20 per share.
On January 20, 2017, barely two weeks after defendants had stressed their confidence that the deal would be approved by the FTC as structured, Bloomberg reported that the FTC was unlikely to approve the deal based on concerns that “Walgreens’s proposal to sell 865 drugstores . . . doesn’t go far enough to preserve competition that would be lost in the tie-up.” On this news, the price of Fred’s stock declined $0.55 per share. On January 30, 2017, Rite Aid and Walgreens announced they had terminated the Original Merger agreement and had entered in to the Revised Merger agreement, slashing the Original Merger consideration from $9 per share to between $7 and $6.50 per share.
Then on June 29, 2017, Walgreens announced the termination of the merger between Walgreens and Rite Aid and terminated the Fred’s Asset Purchase Agreement. Fred’s received $25 million as reimbursement for expenses associate with the terminated purchase agreement. On this news, the price of Fred's stock dropped $2.78 per share, or over 22%, from $12.20 per share on June 28, 2017 to $9.41 per share on June 29, 2017. The price of the Company's stock continued to fall over the following months, and by the end of September 2017, Fred’s stock was trading at between $6 and $7 per share.