Albertsons Ends Buyout Talks
Albertsons Inc. announced late Thursday that it had ended talks to sell the entire company, after reports that negotiations with a group of bidders broke down the night before.
The Boise, Idaho-based grocery chain said it was still in discussions with several potential buyers to acquire the company’s “underperforming assets,” apparently a reference to poorly performing supermarket locations.
Supermarket chain Supervalu Inc., a member of the group that was close to a deal Wednesday night, confirmed in a statement Thursday that the consortium had “mutually agreed to terminate all discussions regarding an acquisition of Albertsons.”
And drugstore giant CVS Corp., which had been close to a deal for Albertsons’ Sav-on and Osco drugstore chains, released its own statement saying that it was pulling out of the talks.
CVS and the other bidders were on the verge of completing a deal to acquire Albertsons for about $9.6 billion in cash and stock when talks broke down.
In a sign of how close a deal was, CVS said it inadvertently issued an e-mail invitation Wednesday night for investors and analysts to participate in a Thursday morning conference call regarding the deal. The Woonsocket, R.I., company, which owns 5,400 retail and specialty pharmacies nationwide, then retracted the e-mail, saying no agreement between CVS and Albertsons had been reached.
Albertsons declined to comment further Thursday night. None of the other parties returned calls seeking comment.
In addition to Supervalu and CVS, private investment groups Cerberus Capital and Kimco Realty Corp. were part of the group contending for Albertsons, which put itself up for sale in September.
Albertsons’ stock slumped 8% early Thursday on fears that the talks had collapsed for good. By day’s end, Albertson’s shares fell 3.4%, losing 82 cents to $23.28.
The group of bidders was prepared to offer about $26 a share for Albertsons -- $20 in cash and $6 in Supervalu stock, according to Reuters news service. Eden Prairie, Minn.-based Supervalu wanted Albertsons’ strongest stores and Cerberus and Kimco wanted the underperforming ones. Because Albertsons owns 70% of its real estate, Cerberus and Kimco could generate cash by selling off the assets.
In a note to investors early Thursday, Morningstar Inc. analyst Mitchell Corwin said Albertsons’ board may have been holding out for a higher price.The Wall Street Journal reported on its website that the negotiations to sell the whole company might have foundered on antitrust concerns.
Albertsons has been battered in recent years by intense competition from supermarket rivals and discount stores such as Wal-Mart Stores Inc. The company in November said third-quarter profit fell 30% from a year earlier as it struggled with flat sales, aggressive competitors and disruptions from the Gulf Coast and Florida hurricanes.
Along with Kroger Co.’s Ralphs and Safeway Inc.’s Vons and Pavilions stores, Albertsons has also been fighting to win back Southern and Central California customers lost in the 4 1/2 -month battle two years ago with its unionized workforce, which had protested proposed cuts in health benefits.
Increased promotions and steep price cuts have cut into profits at all three companies.
It wasn’t clear Thursday night whether any of Albertsons’ Southland stores were included in the company’s catalog of underperforming assets. But the Los Angeles City Council, acting in part on fears that a deal for all or part of Albertsons could lead to job losses in the city, approved an ordinance Wednesday that would make it harder for acquiring companies to shed existing grocery workers.
The nation’s second-largest supermarket chain, Albertsons owns 2,500 stores in 37 states and employs 240,000 people. Its holdings include 270 Albertsons markets and 332 Sav-on Drugs stores in Southern California.
According to Bear Stearns & Co. and research firm Trade Dimensions, Albertsons held a 16.8% market share in Southern California at the end of 2004, putting it in third place among the big three companies. Ralphs at the time held an 18.1% share, and Vons and Pavilions controlled 17.4% of the market.
*
Times wire services were used in compiling this report.
