Roundy’s For Sale … Again
The 77 percent of respondents to a RetailWire poll
in February 2007 who thought it was “very” or “somewhat likely” that
Roundy’s owner Willis Stein & Partners would sell the grocer can’t really
be blamed. After all, a Wall Street Journal piece at the time reported
on how well the chain was doing and everything seemed to be falling into place
for a deal to be made.
Roundy’s, of course, was never sold, but new reports
by the Deal Pipeline (a
subscription site) and Supermarket News maintain that Willis Stein is
looking to sell again.
The Supermarket News piece speculated that potential
suitors could include investment firms, Safeway’s Dominick’s Finer Foods division,
Kroger, and Schnuck Markets. The Deal Pipeline list included Supervalu
on its list.
David Livingston, principal at DJL Research and a member of the RetailWire BrainTrust,
told The Business Journal of Milwaukee, that whatever company acquires
Roundy’s will have an uphill battle against stiff and growing competition from
Aldi, Walmart and Woodman’s Food Markets.
“Seems like every week we hear another Wal-Mart coming in, and every
time one of these comes in, it’s going to change the value of (Roundy’s),” Mr.
Livingston told The Business Journal.
Discussion Questions
Discussion Questions: Do you think Roundy’s will be sold this time around? What possible acquirer do you think would be the best fit for Roundy’s?
Yes it will be sold again. As to the best acquirer? Anyone who doesn’t shares David’s view that Walmart can’t be beaten. It’s never the asset that brings value through acquisition it’s how that asset is managed and nurtured after the sale that separates winners from losers.
Yes, I believe they will be sold. Based on current difficulties, I don’t think SuperValu is a player. Schnuck’s and Kroger are likely suitors. Investment firms will be interested based on the original purchase price by Willis and Stein and their dividends to date. Performance trends in the last 2 years may mitigate against the purchase price being asked.
I agree that perceived competition is not going to prevent a motivated seller and the right acquirer from striking a deal. Roundy’s has made significant progress in the recent past and in many favorable ways have transformed their operation. Is it a risk? Absolutely. But, for the right-minded buyer and a strategic eye toward differentiating the shopping experience and catering to the unique needs of the communities in which Roundy’s operates, this could prove to be a well-timed acquisition.
I don’t have a clue whether it will be sold or not. I don’t think it will be SuperValu; they are in deep trouble over their last acquisition and Roundy’s has a grim future. Safeway has been burned by Dominick’s in Chicago. Nothing but store closings, drops in sales, and drops in market share. Roundy’s would be more of the same for them. Schnucks? That’s just a reporters speculation only because they are in the next territory over. I could see them perhaps cherry picking a few stores. Kroger makes some sense but they have to accept the fact that they will probably not improve the sale and most likely see a 15-20% drop in current sales due to competitive changes and the learning curve of buying a new company.
It seemed the interest last time was from foreign investment firms. However when they did the math and saw what the impact of Walmart, Woodmans, Aldi, Costco, and Target was going to be, they passed. If you think it was bad in 2007, take a look at 2012. We have more Walmarts than ever anticipated. Target is kicking in with competitive price groceries. Woodmans shows no sign of letting up. Hy-Vee is doing another store in Madison. Skogen’s Festival continues to make sport of Roundy’s weaknesses outside of Milwaukee. If Woodmans every decided to do a smaller box format by taking over all the Kmarts in the state, then it would really get ugly.
In my opinion, I think Roundy’s is repeating 2007 all over again by window-dressing the books with raising prices and cutting labor. The real estate portfolio is updated but sales per square foot appears to be challenged. Looking very A&P-eque.
Whole Foods and Sendiks are the quality and service operators. There is now an abundance of low price leaders. Roundy’s is stuck in middle like a deer in the headlights. And the middle of the road is where you find the roadkill.
I’m thinking perhaps they could be sold in pieces to a number various retailer with each group taking a limited number of stores in different regions, like Hy-Vee, Festival, Schnuck’s, Piggly Wiggly, Whole Foods, various independents, etc.
I’d like t0 add that I think that any retailer who tries to come from out of state to buy Roundy’s will get their rear ends handed to them. The stores have the best chance for success if they are sold off to the existing successful retailers in Wisconsin. Sure Rainbow in Minnesota would be separate but there are a lot of good supermarket retailers in the Twin Cities. I can think of at least a dozen very successful grocers in Wisconsin that could buy most of the stores. I see a lot of closures and consolidations, however, that will be just the natural order of things because after Walmart finishes, there will be too much square footage anyway. SuperValu, Nash Finch, and Piggly Wiggly all have some very good operators who have the ability to bring the Roundy’s stores back from the dead.