Albertsons Considers Selling; Tesco and Others Consider Buying
By George Anderson
On Friday, Albertsons released a statement from the company’s chairman and CEO, Larry Johnston, in which he said the retailer was “exploring strategic alternatives to increase shareholder value, including a possible sale of the company.”
Company executives and large shareholders have, reportedly, been frustrated by the chain’s inability to maximize its stock price in the face of tough competition from Wal-Mart and others.
The possibility of a sale did give a boost to those unhappy with Albertsons’ stock price, however, as share prices were up by 26 percent at one point in Friday’s trading before finally settling up at 11.19 percent.
Many see Albertsons’ exploration of a sale as a real estate play.
Barbara Walchli, a portfolio manager of the Rocky Mountain Equity Fund which owns stock in Albertsons, told The Idaho Statesman, “What I’m seeing is that management is clearly frustrated by industry conditions and competition coming from Wal-Mart, and they are trying to unlock the value of the real estate of the company.”
With the announcement that Albertsons is looking into selling, the speculation about buyers has begun.
Most seem to think it is unlikely that a single buyer would step up due to cost and/or regulatory hurdles.
Burt Flickinger III, managing director of the Strategic Research Group said, “In all likelihood, it would probably be a financial buyer more than a strategic buyer because companies that would have had some interest in the past, most notably Ahold and Safeway, are selling their operating companies rather than buying companies,” he said.
Companies that might have a strategic interest in purchasing Albertsons include Target and Tesco.
“Target has an excess amount of cash (from sale of Marshall Field’s and Mervyn’s), and it’d be a very complementary combination,” said Mr. Flickinger. “It would go from Target to a primary national player overnight and give Target great locations.”
Tesco has been identified as a possible suitor because as Neil Stern, a senior partner with McMillan Doolittle, told The Scotsman, “Tesco is the premier retailer in the world right now and they’re not represented in the United States. They have proven that they can compete with Wal-Mart.”
Recently, Wal-Mart’s CEO, Lee Scott, suggested in a published interview that the British government should look into Tesco’s business practices to determine if the company was operating outside that nation’s fair labor practices.
Moderator’s Comment: What do you believe will be the likely result of Albertsons’ exploration of strategic alternatives for its business? What would
the buyer(s) have to do to avoid repeating what has brought Albertsons, under its current management, to this point? –
George Anderson – Moderator
- Albertsons may put itself up for sale –The Idaho
- Tesco mulls entry into US with Albertsons bid – The Scotsman
- Kroger Sizing Up Albertsons – The Cincinnati Post