Rite Aid (RAD) Higher On Speculation It Could Be Takeover Bait After Walgreen/Duane Reade Deal

Shares of Rite Aid (NYSE: RAD) are higher today on speculation in could be the next takeover target in the drugstore sector, sparked by comments today from an analyst at UBS.

Analyst Neil Currie notes that with Walgreen's (NYSE: WAG) acquiring Duane Reade, "Rite Aid is the last remaining major drug store asset in the US, with meaningful exposure to dense urban markets."

Discussing some valuation metrics, Currie notes that Duane Reade sold at a value of $4.2 million per store, Long's sold to CVS at $5.6 million per store in 2008 and CVS and WAG currently trading at $4.7-$5.2M per store. They said this compares to about $1.6 million per store for RAD.

Currie said while RAD's sales per store is 22% lower Long's, it is still considerably undervalued.

He thinks CVS, Walgreen's and Wal-Mart (NYSE: WMT) could have interest in RAD stores, saying "We think any of these operators could significantly enhance RAD profit metrics and add meaningful synergies."

The firm is maintaining their Buy rating and $4 per share price target on RAD.

Shares of RAD are up 14.4 percent today to $1.59.

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