CVS also plans to buy the drugstores' real estate for $1 billion in cash and then sell "at or soon after closing in a sale-leaseback transaction of equivalent value."

The deal will give CVS a big boost in Southern California, where about half of the drugstores are located. The other half are in existing CVS markets in the Midwest and Southwest and the distribution center is in La Habra, CA. "This transaction offers significant long-term strategic and financial benefits," CVS president and CEO Thomas M. Ryan says in a corporate announcement. "It provides immediate market share leadership in the high-growth LA/Orange County and San Diego markets, which are new markets for us, and also strengthens our position in many existing markets in the Midwest and Southwest."

Ryan adds that the acquisition also provides economies of scale and a platform for further growth in California. "The stores we have opened there to date are performing well ahead of our expectations," he says. "However, finding desirable real estate in Southern California is challenging and takes longer than in most other parts of the country. This transaction offers speed-to-market in these fast-growing regions."

The CVS deal is expected to close mid-year. However, it is dependent on the closing of the merger of Boise, IA-based Albertson's with Eden Prairie, MN-based Supervalu Inc. Also participating in the broader transaction is an investment group led by Cerberus Capital Management LP of New York City and encompassing Kimco Realty Corp. of New Hyde Park, NY; Klaff Realty of Chicago; Lubert-Adler Partners of Philadelphia, and Schottenstein Stores Corp. of Columbus, OH. Together the entire Albertson's package is selling for $17.4 billion in cash, stock and debt assumption.

For its $12.4-billion portion of the deal, Supervalu will gain 1,124 stores in the Rocky Mountain, Northwest and Southern California regions that operate under such names as Albertson's, Acme Markets, Bristol Farms, Jewel-Osco, Shaw's and Star Markets. The acquisition will make Supervalu the second largest supermarket company in the country. "The combination of operations will create a premier food retail powerhouse of 2,656 stores from coast to coast, tripling the size of our current retail operations," Supervalu chairman and CEO Jeffrey Noddle says in an announcement.

The rest of the Albertson's package--655 Albertson's and Super Saver stores, plus offices and distribution centers in Texas, Florida, Northern California, the Rocky Mountains and the Southwest—-will be acquired by the Cerberus-led investor group.

"We believe this transaction increases shareholder value by capturing strong value for the ongoing business enterprise, monetizing valuable real estate assets and affording shareowners the opportunity to benefit from a substantial continuing ownership interest in a powerful, growing and vibrant new company," Albertson's chairman, president and CEO Lawrence R. Johnston says.