BOISE, Idaho - The same consortium whose bid for Albertsons was rejected last month reportedly submitted a new offer for the company late last week.
Sources said the revised acquisition proposal, for a reported 18 cents more per share, significantly resolved a potential antitrust issue in the Chicago market that may have scuttled the earlier deal.
Under the new scenario, Supervalu would sell its 40 or so Cub Stores in Chicago to Cerberus Capital Management, which would clear the way for Supervalu to acquire the object of its affection, Jewel Food Stores, along with Acme in Philadelphia and Shaw's in New England.
Albertsons' Osco and Sav-on drug stores would go to CVS Corp., Woonsocket, R.I., under the proposal, and all other Albertsons divisions would go to Cerberus, a New York-based hedge fund, and Kimco Realty, which would seek buyers for those stores or sell them for their real estate. Industry sources said the stores have the potential for a return of 18% to 20%.
When the original bid was rejected, Albertsons said it would forego seeking a buyer for the entire company and would instead consider the sale of various divisions. Although Supervalu said earlier this month its dealings with Albertsons were over, SN reported last week that some industry analysts believed the two companies might still come to terms.
Albertsons declined to comment on the new bid, and none of the principals involved in the offer could be reached for comment last week.
Albertsons' board was scheduled to meet Thursday to consider the new offer.
One observer told SN the revised bid may have come following pressure on Supervalu from its consortium partners. "You have Cerberus, the largest hedge fund in the world and a very imposing company, plus with Kimco and CVS coming to this little Midwest distributor and saying, 'Let's figure out a way to make this work.'
"Jewel is certainly a better asset than Cub, and Cerberus taking the Cubs off Supervalu's hands resolves the issue."
While it's possible some of the Cubs, which are corporate stores, could ultimately be converted to franchised ownership, some in low-income neighborhoods of Chicago might not have much resale value, the observer pointed out, "so it's probably not a tasty part of the proposal for Cerberus. But it's the pill it had to swallow to get Supervalu on board."
The reported bid for Albertsons by the consortium was $26.18 per share, with the extra 18 cents resulting from Supervalu's higher stock prices since the original deal fell through. The offer breaks down to approximately $20.25 in cash and the balance in Supervalu stock.
The total price of $16.2 billion includes a base price of $9.6 billion and assumption of $6.6 billion in debt.
It was unclear late last week whether the revised offer would be accepted by Albertsons' board.
Andrew Wolf, analyst, BB&T Capital Markets, Richmond, Va., said the new offer could still be rejected.
"The price at $26 still may not be rich enough," he told SN. "If they have made it a better offer by getting rid of the antitrust hurdles, since the price is about the same, that may not placate the board.
"On the other hand, I think a lot of shareholders have been pretty vocal to the board about their disappointment with their actions," he added. "What the bidders have going for them is that shareholders would like to see a deal done, but the board may still not think it's enough to get a deal done."
Robert Summers, an analyst with Bear Stearns, New York, wrote in a research note that he "remains skeptical that the deal process will gain traction."
"Given the public nature of Albertsons' termination of talks," he wrote, "we believe Albertsons would be inclined to provide investor communication if they were seriously considering another offer," which it did not do immediately last week.
Summers said he believes Albertsons is seeking instead to monetize underperforming assets, including those in Texas and Florida, which would enable it to pay down debt or pay out a special dividend. "[Albertsons] would be a stronger company removing underperforming assets and increasing drug retail exposure."
However, a trade observer told SN he'd be "flabbergasted" if Albertsons rejects the latest offer. "That would put things back where they were in late December, and it would mean Albertsons has to do it alone [sell the company piecemeal] - and it would also mean Albertsons would have to talk to investors about why it rejected a strong bid, twice."
Ongoing delays in the process could also make vendors restless, the observer said. "Vendors are happy now, and if you didn't know the company was for sale and comparable-store sales were very negative, you would think everything was going great. The national marketing plan is working well and vendors are working with the company, so things can't be spiraling downward if vendors are happy."
A trade observer told SN that Safeway and Kroger are likely to benefit from the disposal of Albertsons' stores in underperforming division by Cerberus and Kimco. "I'd expect Kroger and Safeway to come away with a number of stores in Florida, Texas, Arizona and Colorado," he said. "However it would seem quite likely that some stores will end up dark, and because dark stores remove capacity from a region, that further benefits Safeway and Kroger."
