Cerberus and SuperValu to purchase Albertson's


business briefs/leads:

WSJ.com - Cerberus Group Nears Albertson's Deal

An investment group of Cerberus Capital, Kimco Realty Corp., and grocery chain Supervalu Inc. is poised to win the auction for Albertson's Inc. for about $9.6 billion, or $26 a share, say people familiar with the matter.
An announcement of the deal could come some time after Albertson's board meets this weekend, say people familiar with the matter. The Boise, Idaho, company is still hashing out details with drugstore retailer CVS Corp., which is in the lead to purchase the company's well-regarded drug chain for up to $4 billion of the overall purchase price.

Cerberus hasn't commented about its plans for Albertson's 2,500 stores, but those familiar with the bid say it relies heavily on their real-estate value, and less on continuing operations.

The number of traditional grocery stores nationwide has dropped to 41,455 in 2004 from 118,920 in 1982 because thousands of small independent grocers have shut down, according to figures from Willard Bishop Consulting, a retail-marketing consulting firm in Barrington, Ill. But the total square feet of traditional grocery store selling space has grown as traditional grocers build larger stores and Wal-Mart blankets the country with supercenters that sell groceries.
Some analysts predict that pieces of the company will be broken off and that a significant number of its stores will be shuttered. Observers say that Supervalu probably isn't interested in running the entire operation but instead will take over one or more of Albertson's attractive divisions, most likely its Jewel stores in the Chicago area. Analysts also predict the buyers will jettison Albertson's roughly 470 stores in Texas, Florida, Colorado and Arizona, a weak group that has struggled to stay ahead of the competition.

So in other words, the plan is that several hundred Albertson's stores are going to be shut down, and the land sold off.

Not the best news for us, but roll with it we shall....

see here for backstory

update 12/23/05. Seems like the deal has fallen through.

After a day of high drama, a complex $9.6 billion buyout of Albertson's Inc. collapsed last night as the grocery retailer's board unanimously rejected the deal and several of its would-be buyers said all talks had been terminated.

In a statement last night, Albertson's said it had ended all talks concerning the potential sale of the entire company but continued to be involved in discussions with “several parties that are interested in acquiring its underperforming assets.”...The failure of the proposed sale to a consortium of retailers and financial buyers, which had been in the works since October, came just a day after the buyout appeared close to completion. It marked a frustrating outcome for the underperforming Boise, Idaho, chain, and its chief executive, Larry Johnston, a former General Electric Co. executive.

Mr. Johnston has poured money into store technology and nudged out experienced grocery-store veterans from the top ranks since joining the company in 2001. But the strategies have yielded unsatisfying results. Albertson's put itself up for sale in September.

The failed deal now is likely to leave Albertson's in a more precarious spot. The auction, run by Goldman Sachs and Blackstone Group, was the best gauge of outside interest in the retailer. While a number of groups formed to examine a bid, the interest was more tepid than the amount the board had hoped for, which was as much as $30 a share.

One hitch was concern about getting federal antitrust clearance, given Albertson's overlaps in a few markets with Supervalu Inc., the largest member of the consortium, which was due to acquire 1,100 Albertson's stores. A person familiar with the matter said the debate centered on what is known in legal parlance as a “hell or high water clause,” in which Supervalu would pay for its share of the deal, regardless of whether antitrust or other risks arose before closing.
...Albertson's was particularly concerned about that risk for stores in the Chicago area, and wanted Supervalu to accept the “hell or high water” language, this person said. But Supervalu balked, and the negotiations took a downward turn from there.

Additionally, Albertson's was pushing for more stringent guarantees from the buyout consortium, in which Supervalu's board would agree to recommend the deal to its shareholders no matter how much business conditions or antitrust risks changed its final complexion, according to one person familiar with the matter. Supervalu viewed the request as signing away its fiduciary duties to its own shareholders, this person said, which only heightened the disagreement.

Earlier this week, Mr. Johnston had welcomed the top managers of Supervalu to Boise to seal the deal. But Wednesday night, the supermarket chain's board had recoiled from giving final approval to the buyout led by Supervalu, which was to get 1,100 Albertson's stores; drugstore chain CVS Corp., which was to acquire Albertson's pharmacy operations; and the investment group including Cerberus and Kimco. The parties had continued talks throughout yesterday, these people said. But shortly before 8 p.m., Supervalu issued a statement saying it and Albertson's had “mutually agreed” to terminate all discussions regarding the consortium acquisition. A similar statement followed swiftly from CVS, which Wednesday had mistakenly sent an email alerting analysts to news of a completed transaction.

Advisers for both sides had said the antitrust risk was minimal, said one person familiar with the deal.

Yes, the anti-trust concern is more of a face-saving smokescreen.

But some of the larger divisions have little overlap at all. Aside from Illinois, Albertson's doesn't compete against Supervalu in most of the Midwest. Supervalu operates about 1,280 extreme-discount Save-a-Lot stores across the country and has about 290 traditional or low-priced groceries in the East and Midwest and parts of the West, as well as a large food-distribution operation. Albertson's runs about 2,500 stores in 37 states.

But whether the two chains actually compete head-to-head in overlapping markets isn't clear. Supervalu's largest food-retail operation, the Save-a-Lot stores, are tiny shops with a fraction of the items of a traditional grocer, sold at prices about 40% less than traditional stores. Their target customer is households earning $35,000 a year or less. On the other hand, Albertson's stores target a broader customer base and offer wider selection.



Yo Seth be happy you might be able to roll with it...I work for Albertson's in Az and have for 5 years now. I'm a Night Crew Supervisor and am making top pay...now I'm out job hunting in a right to work state and am probally going to lose at least 7-10 dollars an hour.

consider yourself lucky, I probally only have a month or two left before I'm laid off..I just hope I can pay my rent before they do it.

Zach, I totally empathize with you. These big mergers are never good for the actual employees of the company, only for the corporate higher-ups, and stock holders and the banks. (We aren't any of these, btw)

I wish you luck!

I don't think this "sale", much like the rumored others, is going to happen either. Us little folk don't matter, but if you have two or three hundred thousands shares (and those people are out there) just the announcement of "strategic alternatives" got wall street to look at the value of the real estate and...boom, you made a ton of money. Larry Johnston doesn't have to do a thing, and he's proven himself very good at that.

I have been with Albertson's for well over six and a half years now. I was fortunate as I walked into the door as a Journeyman APC and worked myself up to a 4th Keyperson. I worked for Kroger owned King Soopers for over 4 years before that. I have not been a big fan of the way Albertson's Executive Management has run this company. Especially with the buy-out of "American Grocers" and the way the "American Grocers" Executives were allowed to become executives in the Albertson's family. First of all, those people were allowed to run their company into the ground and now they have run ours into the ground. The only difference now is there is no other "SUCKER" out there going to bail them out this time.

I am the primary bread earner in my family. I am getting married in April and the last thing we expected before that is my loss of a job. Sure, I may be able to get my old job back with King Soopers, but with the crap Wal-Mart has caused, it is only a matter of time before I may face another lay off. So, with that said I may need to look into a whole different carreer. "Would you like fries with that?"

About this Entry

This page contains a single entry by Seth A. published on December 16, 2005 12:41 PM.

PhD was the previous entry in this blog.

Hot Monkey Love is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.


Powered by Movable Type 4.37