Albertsons Said to Renew Buyout Talks
Shares of Albertsons Inc. continued to rise Friday on renewed speculation that an aborted buyout of the grocery store chain might be on again.
The Boise, Idaho-based company -- owner of 270 supermarkets and 332 Sav-on Drugs stores in Southern California -- edged up 6 cents to $22.59, after adjustment for a 19-cent dividend payout. The stock price has climbed more than 4% since the end of trading Wednesday.
Under pressure from large investors, Albertsons planned to restart negotiations with the same buyers who failed in December to pull off a $9.6-billion deal to take the company private, the New York Post reported Friday, citing unnamed sources.
Analysts said Friday that such a move was plausible given hints of continuing interest from the consortium of suitors, which included grocery store chain Supervalu Inc., drugstore giant CVS Corp., and private investment groups Cerberus Capital Management and Kimco Realty Corp. Albertsons declined to comment. Supervalu and CVS didn’t return calls.
“It’s a new year, maybe they are saying it’s time to look at this again,” said Craig Hutson, an analyst with Gimme Credit Publications Inc., which specializes in bond analysis.
During a conference call with analysts this week, Supervalu Chief Executive Jeffrey Noddle sounded a note of regret.
“We viewed the sale of Albertsons and specifically the availability of certain of its premier properties as an extraordinary opportunity for us to consider,” Noddle said.
Whether the unstated issues that scuttled the previous deal can be resolved is hard to know, analyst John Heinbockel of Goldman, Sachs & Co. said in a report to investors Friday. But Supervalu and CVS, he said, “are almost certainly still willing to pursue a deal.”
Just before Christmas, an agreement apparently was so imminent that CVS inadvertently issued investors and analysts an e-mail invitation to a conference call regarding the proposed transaction. The Woonsocket, R.I., company, which owns 5,400 retail and specialty pharmacies nationwide, then retracted the e-mail, saying no deal had been reached.
In the prior talks, the group of bidders was reportedly prepared to offer about $26 a share for Albertsons -- $20 in cash and $6 in Supervalu stock.
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.
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 hurricane season.
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 eaten into profits at all three companies.
Albertsons, the nation’s second-largest supermarket chain, owns 2,500 stores in 37 states and employs 240,000 people.
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 top three companies. Ralphs at the time held an 18.1% share, and Vons and Pavilions controlled 17.4% of the market.
