Are events of early days 2007 destined to replicate, in some form, events of early days 2006?
Maybe so. Let's take a look. At precisely this juncture a year ago, it was mentioned in this space that a buyout deal intended to convey many of the retailing assets of Albertsons to Supervalu had foundered. It was evident at the time, though, that Albertsons was destined to be apportioned and somehow sold. Sure enough, as it developed just days later, the Supervalu-Albertsons deal was resurrected and, as we all know, was ultimately consummated. The upshot: As is reported in this week's SN, Supervalu's current third-quarter earnings soared nearly 51% on the wings of that acquisition. (Page 1.)
To return to this time last year, it was also mentioned in this space then that Tesco seemed to be on the brink of making a move that would bring it to these shores with retailing assets. The unlikelihood that it would do so by means of an acquisition, although widely anticipated at the time, was cited.
Less than a month after that, Tesco made it known that it intended to develop an entirely new chain of upmarket convenience-like stores in the western U.S. Tesco's plans have remained largely under wraps even after the passage of the better part of a year, but, according to a news article in last week's SN, Tesco has selected 31 sites for store development in Southern California, Nevada and Arizona. It has also selected a site for a distribution center in Riverside, Calif. Most facilities are to be built from the ground up.
But that was then. What about now? As was reported on the front page of last week's SN, it has been bruited about for some time that there are a number of potential deals on the horizon. None of them are huge, but it's likely that some of them will be accomplished before too long. There are various reasons that this may be the time for deals: There is much venture capital seeking harborage, there are retailing assets for sale that might profit from new ownership and there are companies hobbled to the degree that an asset-sale capital infusion would help a lot.
Several possible deals were described in a front-page news article in last week's SN, which was written by Mark Hamstra, SN's retail-financial editor. Here's two of them:
Pathmark: It has long been speculated that a union between Pathmark and A&P might be in the works. Both operate in the urban Northeast, which remains a highly fragmented market. Both players are under competitive challenges and might well benefit from joining forces. Moreover, the investment concern Yucaipa has a 40% stake in Pathmark. Yucaipa has a long history of assembling companies so they could be combined and sold later. It's not impossible to imagine a combined Pathmark-A&P flipped to another entity.
BJ's Wholesale: It has been speculated for more than a year that this company could go to a financial buyer. Indeed, that possibility was mentioned a year ago at this time. No such deal came about, but speculation continues that it could happen. In last week's SN it was reported that BJ's is now in a restructuring mode. Is BJ's being prettied up for a buyer?