KKR REVIEW PROMPTS DELAY IN BRUNO'S DEAL

ELLIOT ZWIEBACH

BIRMINGHAM, Ala. -- The acquisition of Bruno's here by a unit of Kohlberg Kravis Roberts & Co., New York, was temporarily delayed because of questions that arose during KKR's due diligence review of the chain.

Neither company was willing to discuss what issues had caused KKR to extend the review period, and it was unclear late last week whether the extension signaled a short-term delay in the acquisition process or a total collapse of the deal.

KKR agreed last month to acquire Bruno's for $12.50 per share, or a total price of $1.2 billion. The KKR entity formed to make the deal is Crimson Acquisition Corp.

Bruno's said the due diligence period, which was set to end May 11, was extended one week "to allow Crimson Acquisition to assess the materiality . . . of certain information which has been provided by Bruno's to Crimson Acquisition during its due diligence review."

The extension led to a drop in Bruno's stock price, which could lower the price KKR is willing to pay, observers said.

While observers told SN last week they expect the deal to proceed, "the price may get a haircut," one analyst said.

That could have a significant impact on the deal, another analyst noted, "because no one knows if Bruno's will accept anything less than $12.50 a share."

According to the analyst, "This is not just a bargaining ploy to reduce the price of the deal. The use of the term 'materiality' in the Bruno's statement indicates the extension was not just an issue of paperwork or the need for more time but an indication of something that may have made KKR question the price of the deal, or perhaps the deal itself."

Although KKR has already signed a definitive agreement to acquire Bruno's, "it has the option to walk away from the deal if it finds anything in the due diligence process not to its satisfaction," the analyst said.