Campaign heats up for Albertson's by Vipal Monga and Soma Biswas Updated 05:53 PM EST, Dec-8-2005
With bids in for Boise, Idaho-based supermarket chain Albertson's Inc., a consortium consisting of Cerberus Capital Management LP, Kimco Realty Corp., and Eden Prairie, Minn.-based supermarket Supervalu Inc., appears to be in the lead, having submitted an offer that includes a premium to the company's market value. (For more on this auction and others, visit AuctionBlockDatabase.com.)
Several teams submitted bids for the struggling Albertson's on Dec. 7, the auction's deadline. A consortium of Kohlberg Kravis Roberts & Co., Apollo Advisors LP and Texas Pacific Group made an offer that several sources said was close to the company's market capitalization of about $8.7 billion.
Other bidders who have stepped up include Los Angeles-based private equity firm Yucaipa Cos., which, according to one source, put in "a differentiated bid." Although the source would not elaborate, another said that the firm offered Albertson's a couple of options, including bidding for the whole company or going only for the northeastern stores. Yucaipa, which is run by former Fred Meyer Inc. CEO Ron Burkle, bought a 40% stake in Carteret, N.J.-based supermarket company Pathmark Stores Inc. and is interested in pairing that asset with Albertson's New England-based Acme and Shaw's chains.
Unclear late Thursday afternoon was the shape of a bid by a consortium consisting of T.H. Lee Partners LP, Bain Capital LLC and Warburg Pincus. One source said the consortium is working on an offer with Albertson's competitor, Kroger Co. of Cincinnati. However, that bid has yet to be fleshed out, the source said, suggesting that the private equity firms are unsure of what valuation to put on the asset, and that Kroger is leaving itself the option of bidding by itself as negotiations continue.
The drugstores owned by Albertson's are also receiving interest. The drugstores are considered to be among the company's most valuable units and have received bids from both Woonsocket, R.I.-based drugstore operator CVS Inc. and Deerfield, Ill.-based Walgreen Co. Although the level of their bids could not be determined, a source noted that the real-estate value of the standalone drugstores would have to be factored into the bidding for Albertson's.
Although Wednesday was technically the final bid date for the auction, the Albertson's board is expected to meet soon � perhaps this weekend � to evaluate the bids and then decide how to proceed with the bidders. Several sources said they expected the company's dealmakers to begin negotiating to gain as high a valuation for the supermarket chain as they can.
Press officers for the private equity firms and the individual companies either did not return calls or declined to comment.
When Albertson's announced it was beginning the sale process, several sources said the company could fetch more than $16 billion, including long-term debt. Some bidders, however, have since become less enamored with the company, sources said, noting that the due diligence process was bogged down by slow disclosures and numbers that did not match bidders' expectations.
Frustrating some of the bidders was that the company appears intent on selling its drugstores to strategic buyers, instead of including them as part of the whole company for one of the private equity consortia.
Albertson's stock was trading at $23.43 a share Thursday, down from a high of $26.51 on Sept. 19, after the company announced on Sept. 2 that it had hired Goldman, Sachs & Co. and Blackstone Group LP to explore strategic options. Before the announcement, the stock was trading at $20.73.