as it appears so far from the cerebus spokesperson they say they have no plans to change the banners purchased or the stores. Surprising i find that considering first thought was liquidation of them by most analysts. Apparently, cerebus is going to invest in the banners instead of parting them out?
They will prune the worst stores and profit from their real estate and then flip the best stores to other grocers. Ceberus bought the best of SuperValu's store banners that are overall making the most money and were the middle market grocers that SuperValu added to their lower market stores circa 2006. If you every shopped prior to 2006 in Chicago at Jewel and then went to SuperValu's Cub across the street, you know that SuperValu took Jewel downmarket.
These are the stores that have more value. Cerberus, et al wanted Alberstons since they already own some Albertson's stores. Right now there are actually two distinct supermarket chains with the name Alberstons. Now they can combine them into one chain and then flip it as one leaned up entity. Keep in mind, that Cerberus closed about 2/3 of the Alberstons stores that they previously acquired in 2006 and flipped the closed stores as real estate. Now they will do the same with the rest that they are acquiring.
With Jewel-Osco, they actually have the leading grocer in Chicago. The problem is that Jewel-Osco isn't leading nearly as much as they used to. Still, through union politics combined with the city politics, they've been able to greatly curb Walmart's expansion in the city limits of Chicago. I expect that Ceberus, et al will close at most maybe 1/3 of the stores and flip the rest to Kroger or Ahold who badly wants to have greater presence in Chicago. Ahold only has Peapod in Chicago while Kroger just has a handful of Food4Less warehouse food stores. Shaws/Starmarket and Acme will be treated by Cerberus et al with a mix of their approach towards the differing approaches towards Alberston's and Jewel.
The Shaw's acquisition starting with Albertson's all the way to Supervalu has been a total mess. The slippery slide down started with Albertson's as Mr. Johnston cut expenses priming ABS for a sale. In steps Supervalu, already in huge debt from the day the deal was signed, and further down we sunk.
It's a mad scramble now to get some of our stores back in the black. The districts were split up again, with two new formats emerging as a way to steal sales from WMT and WFM.
The Neighborhood Stores are supposed to position themselves as a way to garnish, or at least stop losing, sales to lower priced retailers in our region. What most of these stores feature are many 1.00 items, as well as produce and perishables that cater to the local demographic (in many instances, these stores are in largely "ethnic" areas).
The Star Market district, consisting of mostly Boston area stores (in great locations, many near universities) was put in place to come up against more high end retailers like Whole Foods and Roche Brothers. The fine point on this particular reformatting is that people will pay the higher price, but they want the experience that goes with it. That means, cleanliness, service, and selection. Recently, there were a number of resets to get the products that a more affluent population would expect or want. The only problem is, the environment of the stores is still lagging. Many of the older city stores have rusting, dented fixtures like self service cases in produce, meat, and seafood. The decor is dated, quite often in muted greys or beige that show their age. The lighting is sufficient, but is mostly florescent tubes, whereas more upscale retailers are using halogen and LED.
I think we've made decent strides in the right direction, but the finer points are lacking. What will Cerberus do? Not sure, but hopefully we have enough momentum just now to keep moving forward.
I generally agree with your assesment of Cerberus and their handling of the acquired banners. Cerberus wants to make money more than they want to be in the grocery business.
The $250 million paid to acquire shares of SVU was a nominal cost for what each party gained. Supervalu was able to show their shareholders that they are concerned with and capable of adding shareholder value. Even if it does little to help true longs that were involved with Supervalu prior to the meltdown and drop beloiw $2. Additionally, and more importantly, it gave Cerberus influence and control over the company which it cares about more for acquiring aditional assets at a future time than it does for it's turnaround potential.
I can't believe that people are missing this aspect on this thread. When I read comments suggesting that Cerberus paid $4 becvause they know it's worth more... I just chuckle. The $4 numbeer is not the key. The 30% is somewhat the key... But the max $250 million is the real key.
That's a relatively small investment to basically change the board and insert your puppets to replace the former puppet Sales. As i said before and certainly believe now, this is a course events that was set in place back in 2006. It is part of a master plan to squeeze as much out of this company as is possible. Sell it off, close it down, lay off employees, and eventually go bankrupt to screw the bond holders, shar holders and pension participants.
I don't fault Cerberus. They saw a scenario where the writing is the wall. They approached SVU and said we know it's over, you know it's over, there is no reason we can't all make money before this ship sinks.