The family that controlled the Warwick-based Brooks drugstore chain has seen the value of its stock holdings melt away in the year since it sold the company to a rival pharmacy operator.

Canada’s Jean Coutu Group (PJC.A:TSX) last year sold more than 1,850 Brooks and Eckerd drugstores and 6 distribution centers to Rite Aid Corp. for $3.9 billion in cash and stock in a deal that closed June 4, 2007.

Under the deal, Rite Aid paid $2.3 billion in cash to Jean Coutu and issued the company headquartered in Longueuil, Quebec, about 252 million shares, according to filings made last year to the U.S. Securities and Exchange Commission. The acquisition made Jean Coutu Group the largest Rite Aid shareholder, with 32 percent of common stock and about 30 percent of voting power. Jean Coutu’s holding in the third-largest American drugstore chain remains unchanged.

A Coutu family representative sounded naturally upbeat after the deal was first announced in August 2006.

In an interview with The Providence Journal, Michel Coutu said the deal was a good one for both companies, although most surely for the Coutu family, which controls 48 percent of Jean Coutu stock and 90 percent of the voting shares.

“Thirty-two percent of a $26-billion corporation is not bad; we will have zero debt,” said Coutu, who served as president of Jean Coutu’s American operations. “I don’t think the shareholders of The Jean Coutu Group can say the American adventure was a mistake.”

Whether that analysis remains true is uncertain as the value of the Coutu stake in Rite Aid shrivels.

Shares of Rite Aid (RAD:NYSE) ended June 4, 2007 at $6.55, valuing Jean Coutu’s stake in the Camp Hill, Pa., company at more than $1.65 billion. In the year following the closing, Rite Aid shares dipped as low as $1.91 a share. Rite Aid shares closed at $2.19 at the one-year anniversary of the deal, valuing the Jean Coutu shares at $552 million — a 66.5-percent drop.

Rite Aid’s debt and struggle to get a handle on its operations are dragging down the value of its Canadian stakeholder, which itself is Canada’s second-biggest pharmacy chain.

Rite Aid’s problems earlier this year led to the biggest quarterly loss in Jean Coutu’s history as a public company: it recorded a net loss of $265.7 million. Rite Aid reported April 10 that it had lost $952.2 million on an income-tax charge and costs to integrate the Brooks and Eckerd pharmacies it bought from Jean Coutu.

“Rite Aid has been a drag on the stock, for sure, equity analyst David Hartley told Bloomberg News. “It continues to disappoint financially. The value of Rite Aid has come down a lot.”

One stock brokerage, RBC Dominion Securities, now considers Jean Coutu stock as a value play because shares of the Canadian company trade at a discount compared with other pharmacy chains — and come with a bonus on the side.

Putting aside the Canadian chain’s Rite Aid stake leaves a market value of $7.05 per share for Jean Coutu’s Canadian operation, which is the market leader in Quebec.

Jean Coutu’s Canadian operations therefore are trading at 11 times earnings, while U.S. pharmacy chains typically trade at 13 times earnings.

“Investors are paying a slight discount to fair value for the Canadian operations and are getting the Rite Aid stake for free,” according an RBC report. RBC has an “outperform” recommendation on the Jean Coutu stock, and placed a one-year target price of $14 a share on it — about double its current value.

Meanwhile, American brokerages are still betting on a Rite Aid turnaround.

“We believe Rite Aid has made significant progress over the past several years to strengthen its competitive position,” wrote Lehman Brothers analyst Meredith Adler in a report last Thursday.

Referring to the Brooks-Eckerd purchase, Adler said: “We believe this transaction should create significant value for Rite Aid shareholders … over time we still believe the potential reward should more than compensate investors for the risk, though the road has been rockier than we expected.”

pgrimald@projo.com