updated 1/18/2007 5:27:56 PM ET 2007-01-18T22:27:56

Rite Aid Corp. shareholders on Thursday overwhelmingly approved a deal worth almost $3 billion to buy more than 1,800 Brooks and Eckerd stores and become the largest drugstore operator on the East Coast.

Rite Aid, the nation’s third-largest drugstore chain, has billed the deal as a way to catapult it within reach of the rapidly growing drugstore leaders Walgreen Co. and CVS Corp. As drug retailers expand into other services, Rite Aid executives say the acquisition also will make the company a more attractive partner for in-store health care and wellness clinics and pharmacy benefits managers.

The Federal Trade Commission is still reviewing the deal. Rite Aid has said it expects the transaction to close shortly after the company’s fourth quarter, which ends March 3.

Shareholders voted 404.1 million shares for and 9.1 million shares against acquiring the U.S. Eckerd and Brooks operations of Canada’s Jean Coutu Group Inc. for $1.45 billion in cash and 250 million shares valued at about $1.5 billion. Rite Aid is also assuming $850 million in debt in the deal.

“The stronger we get, the more choices we have in the future,” Mary Sammons, Rite Aid’s president and chief executive, said in an interview after a shareholder meeting at a downtown Harrisburg hotel to announce the vote tally.

For Rite Aid, the deal marks its first major acquisition since a turnaround team arrived to bring the company back from the brink of bankruptcy seven years ago.

The deal would create a company of about 5,180 stores in 31 states and Washington, D.C., with revenue of nearly $27 billion, stores on both coasts and major market shares in the New York City, Philadelphia, Pittsburgh and Baltimore areas.

Rite Aid also will acquire six distribution centers and Jean Coutu will become the company’s largest shareholder, with a 30.2 percent voting stake.

The merits of the deal had divided Wall Street analysts and proxy advisers. Some said Rite Aid has the savvy to win customers back to the deteriorating Eckerd stores. Others said Rite Aid is overpaying for the stores and hasn’t shown the ability to make its own stores productive.

Rite Aid shares gained 6 cents to close at $6.14 on the New York Stock Exchange. Since it was announced Aug. 24, Ride Aid’s stock price has risen about 30 percent.

“I think if you look at the stock price today, the market likes this transaction,” company chairman Bob Miller said in response to questions at Thursday’s meeting.

Shareholder Doug Hoskins, a retired insurance brokerage partner who attended the meeting, said he reluctantly voted for the deal after reading that a major proxy adviser supported it. Hoskins, who lives just a few miles from Rite Aid’s headquarters in Camp Hill, remembered the company’s deep plunge into debt under a prior management team, six of whom were convicted or pleaded guilty in connection with a federal accounting-fraud investigation.

“I thought they weren’t healthy enough to make a big jump like this,” Hoskins said.

Even with the acquisition, keeping up with CVS and Walgreen will not be easy.

Walgreen, with 5,584 stores and $47.4 billion in revenue in its last full fiscal year, opens a new store every 18 hours and has 500 new stores planned for this fiscal year. CVS, with 6,200 stores and $37 billion in revenue in its last full fiscal year, purchased about 700 Sav-On and Osco drugstores in June.

To absorb the new Brooks and Eckerd stores, Rite Aid has said it will spend $950 million over five years to rebrand them, convert them to Rite Aid’s systems and rebuild customer loyalty.

Analysts say the deal will propel Rite Aid’s long-term debt to approximately $5.8 billion — higher than CVS or Walgreen. However, Rite Aid said it expects to reduce its debt-to-cash-flow ratio to below its current level within two years after the deal closes.

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