Alden Global Capital Takes 25% Stake in Fred's

By David Benoit 

Pharmacy chain Fred's Inc. handed an activist investor a quick gain this week.

The small pharmacy operator's shares shot up 81% on Tuesday after it announced it would more than double its size by purchasing 865 stores Rite Aid Corp. needs to sell to close its merger with Walgreens Boots Alliance Inc.

The deal paid off handsomely for small activist, Alden Global Capital, which had been quietly building a large stake in Fred's, according to a person familiar with the matter and a document reviewed by The Wall Street Journal. The hedge fund kept buying even after the rise and now owns nearly 25%.

Alden supports the deal and believes the stock is undervalued even after this week's huge bump, the person said. The firm plans to talk to Fred's about the deal, capital allocation and the makeup of its board, the person added.

A Fred's representative wasn't immediately available to comment Thursday.

All told, the purchase cost Alden about $158 million and was worth $180 million as of Thursday's close, a quick 14% return.

(END) Dow Jones Newswires

December 22, 2016 17:40 ET (22:40 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.