NEW YORK - The industry felt the first aftershocks of the $17.4 billion Albertsons breakup last week when federal regulators cleared all parties of antitrust intervention and the soon-to-be owners of Albertsons' weaker stores appointed the architect of their future strategy.
Cerberus Capital Management here, heading the consortium buying Albertsons' troubled retail assets, said industry veteran Robert Miller would be named chief executive officer when the deal closes early this summer. Miller said last week he would not stand for re-election as chairman of Wild Oats Markets, the natural food chain based in Boulder, Colo.
Supervalu, Cerberus and Woonsocket, R.I.-based CVS teamed up in January to purchase all of the assets of Albertsons, Boise, Idaho. The waiting period under the Hart-Scott-Rodino Act expired last week without a request for further information from federal regulators, satisfying a closing condition of the deal, which is expected to close by early summer.
The appointment of Miller as CEO of Cerberus' Albertsons division suggests the investors intend to stabilize, and perhaps effect a turnaround, in at least some of the 655 stores to be acquired by Cerberus and its partners, analysts and observers told SN. It also appeared to spark investor interest in Wild Oats, whose executives last month speculated that Albertsons stores coming to market as the result of the breakup could provide attractive expansion opportunities. Wild Oats' stock rose more than 8% after the news late last week.
Miller, a former Albertsons executive, is well regarded for his work as chief executive at Fred Meyer from 1991 to 1999. And as CEO at Rite Aid from 1999 to 2003, he helped steer that retailer through financial and competitive crises.
In late 2004, he was named nonexecutive chairman of the board at Wild Oats Markets. Miller's appointment at Wild Oats helped attract new investment over the last year, including a 15% stake from Ron Burkle's Yucaipa Cos., Burkle told SN last year. In a financial filing last month, Yucaipa said it may "engage in discussions or negotiations with other persons or entities regarding potential strategic transactions involving [Wild Oats] and other supermarket and retail companies."
"The market is interpreting this as something that could ease a deal between Cerberus and Wild Oats," Andrew Wolf, an analyst for BB&T Capital Markets, Richmond, Va., told SN, adding that is too soon to know whether this is the case.
At Albertsons, Miller will confront a collection of stores bleeding sales and market share amid competition from Wal-Mart Stores and other retailers, and which many observers expected could be liquidated for their real estate value.
"He's one of the very good and very effective operators in the supermarket sector and obviously did a terrific job at Fred Meyer and Rite Aid," Burt P. Flickinger III, managing director of Strategic Resource Group, New York, told SN. "But as difficult as things were at Rite Aid, the job of turning around the Cerberus operating companies is geometrically more difficult."
Flickinger said a turnaround at Albertsons stores in the Sunbelt states could be especially difficult, but noted that uncertainty surrounding Winn-Dixie in Florida, as well as the Albertsons' stores in California that Cerberus will acquire, provides some opportunities. If successful, Miller "could go down as a superstar in the history books of the supermarket industry," he said.
"Assessing the effect of the proverbial Wal-Mart Supercenter tsunami that's hitting the Southern stores so hard and deciding whether to try to rebuild the business in the Sun Belt is the first order of business," Flickinger said. "There's plenty of opportunity in California, which Bob knows well. And Winn-Dixie's in such a free fall that the Florida [Albertsons] stores could provide some opportunities there."
Gary Giblen, senior vice president and director of research at Breen, Murray, Carret in New York, said he expected Miller would serve mainly to stabilize the assets while Cerberus considers its first moves.
"Miller was a quick fix at Wild Oats - a rubber band to keep the company from falling apart," Giblen told SN. "Today, Wild Oats has some epoxy - a deeper team it has been able to field."
"I am excited that I will be back in the grocery business, in areas I am familiar with from my past," Miller said in a statement. "Our goal will be to build a successful operation by focusing on what is important to our customers in each market." He was not available for further comment last week.