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UPDATE · Albertsons Formally Begins New Talks on Buyout
January 20, 2006 · Reuters
Grocery chain Albertsons Inc. on Friday said it received a new takeover offer from a consortium seeking to buy the entire company, less than a month after rejecting a deal said to be worth around $9.6 billion.
Albertsons, the No. 2 U.S. grocer, did not name the consortium, but Supervalu Inc., another grocery chain, said separately that it was part of the group bidding for the company.
Hedge fund Cerberus Capital and real estate investment trust Kimco Realty Corp. are the other investors in the consortium, according to a source familiar with the deal.
Supervalu, Cerberus and Kimco nearly sealed a deal for the grocer late last year. CVS Corp., seeking to buy Albertson's drug stores, was also part of that group.
The Wall Street Journal said on Thursday that the latest bid by the Supervalu-Cerberus team is valued a few cents above $26 a share and includes a structure to lessen antitrust concerns.
Albertsons put itself up for sale last September, having struggled with increased competition from discounters. Its shares fell from around $60 in 1999 to near $20 in the spring of 2003, and stayed in that lower range until takeover speculation fueled a gain.
Albertsons did not say in December why it rejected the original offer, but sources said it was mainly due to the overall price tag and risks associated with the deal.
Albertson's shares were up 36 cents, or 1.5 percent, to $24.23 on Friday. Supervalu's stock slipped 23 cents, or 0.7 percent, to $31.96.
Albertsons said on Friday it was negotiating with the consortium but that there could be no assurances that the new offer would lead to a transaction. Supervalu repeated the same caution.
"The company...does not expect to disclose further developments with respect to the proposal unless and until its board of directors has approved a definitive transaction or has terminated discussions," Albertson's said in a statement.
A source familiar with the earlier discussions said the Supervalu-Cerberus group had been prepared to offer about $26 a share for Albertsons -- $20 in cash and $6 in Supervalu stock -- in a deal worth about $9.6 billion, not including roughly $6 billion of debt.
While anti-trust concerns centering on Albertsons' and Supervalu's store overlap were said to be a stumbling block, some analysts and sources close to the deal say there is little regulatory risk with the companies combining.
Albertsons, based in Boise, Idaho, operates about 2,500 stores under banners including Albertsons', Jewel-Osco and Shaw's. The company hired Goldman Sachs and The Blackstone Group to explore strategic options.
In addition to its namesake grocery stores, the company owns supermarket Shaw's and drug stores OscoDrug and Sav-on.
SUPER DEAL?
Supervalu, which has more than 1,500 stores catering primarily to the low-price market, has been looking for ways to reach a broader base of consumers. It opened its first organic food store earlier this month.
Acquiring Albertson's stores would allow it to quickly grow in key urban markets such as Chicago or Philadelphia. When the first round of talks heated up in December, analysts had expected that Supervalu would buy only a few hundred of Albertsons' 1,800 stores, concentrated in key markets.
Supervalu, which operates grocery stores as well as a distribution business, had said earlier in January that it was still on the lookout for deals after the Albertson's bid failed.