Supervalu Joins Albertsons’ Suitor List

Discussion
Dec 06, 2005
George Anderson

By George Anderson


According to a report in the Financial Times, Kroger is no longer in the running to buy Albertsons but now Supervalu has stepped up to join with Cerberus Capital Management and Kimco Realty to make an offer on the grocery and drugstore chain.


Also considered among the likely bidders is an investment group that includes Apollo Management, Kohlberg Kravis Roberts & Co. and Texas Pacific Group, and another with Yucaipa and Dubai Investment Group. CVS has also been rumored as having an interest in purchasing Albertsons drugstore operations.


Bids are said to be due today with a possible decision made on the deal this month.


Some were skeptical about whether the rumored bid, should it be accepted, made sense for Supervalu.


Eric Larson, a food industry analyst at Piper Jaffray Cos., told the Pioneer Press, “That’s a big bite; that’s a $16 billion bite. Everything’s a possibility, but I would think that would be a bit much. It really isn’t part of what I would call Supervalu style.”


Jean Kinsey, director of the University of Minnesota’s Food Industry Center, sees the logic in a Supervalu bid. “One of the ways that a company like Supervalu stays in business is to have stores you can deliver to,” she said. “You are guaranteeing (buying Albertsons) your business.”


Moderator’s Comment: Does a deal for Albertsons involving Supervalu make sense for either company? What will the eventual winner of the bidding for Albertsons
need to do to improve its competitive position?

George Anderson – Moderator

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8 Comments on "Supervalu Joins Albertsons’ Suitor List"


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Warren Thayer
Guest
15 years 2 months ago

Supervalu had the good sense and the courage, not long ago, to back away from a Kmart deal. With their same team in place, I believe that if they make a bid, it’ll be under terms that will work out for them. I expect one of the first things any buyer would do with Albertsons is replace Larry Johnston, although I am sure a platinum parachute is involved.

James Tenser
Guest
15 years 2 months ago

My instincts tell me that Albertsons doesn’t change hands intact, but rather is split along channel (food – drug) and/or geographic lines. It’s a large pill to swallow whole. An investor group would very likely sell off a chunk to limit risk.

No matter how that scenario plays, the “winning” bidder will still face branding/positioning challenges for the core Albertsons brand. As it stands now, it’s a very conventional, but higher-priced supermarket.

David Livingston
Guest
15 years 2 months ago

Getting Albertsons out of the grocery business is a good deal for Albertsons and their shareholders. Whatever happens, I think the best thing is for each division such as Shaws, Jewel, Bristol Farms, etc. to be off on their own and be allowed to be run by grocers rather than accountants. I don’t think SuperValu would want to end up with the entire company. Taking these divisions private would also be a big plus.

Mark Lilien
Guest
15 years 2 months ago

Assuming the real estate leases allow non-supermarket retailing, SuperValu should only join a “bid team” if it’s agreed in advance among the partners (1) what a maximum “steal this company” bid should be and (2) how the locations will be split up for supermarket use versus other uses. There should be no requirement for SuperValu to take all the locations, and if the price is right, cherry-picking will be worthwhile. If the price is more than a steal, the bidders should walk away. Surplus supermarket location deals are similar to buses: if you miss this one, there will be another in 15 minutes.

Bob Bridwell
Guest
Bob Bridwell
15 years 2 months ago

SV has had its share of problems as well. Their retailer base seems to be diminishing and it is unlikely they have a large enough base of good operators to take over some of the sites.

They would be much better off with Marsh. They have extensive distribution in the area already and many of the Marsh Store Directors are “keepers.” The LoBills could be converted to Save-A-Lots or IGAs.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 2 months ago

Major task and, importantly, Supervalu people must be used to turn Albertsons around. Albertsons’ management must take very secondary roles, if any.

So what happens to the existing Supervalu business and its
customers? Juggling act?
Too, too much to handle, even though Supevalu has some strong executive management. Can we clone the SV executives? Hmmmmmmmmm

Joseph Peter
Guest
Joseph Peter
15 years 2 months ago

Didn’t Supervalu have their sights on Dominick’s? I know the deal fell through, so this would be the best way for them to overcome that shortfall.

Now the only possible suitor for Dominick’s is Roundy’s or Yucaipa….again!

Don Delzell
Guest
Don Delzell
15 years 2 months ago
I’m not sure what the rational for Supervalu is. Perhaps overly harsh, I’ve opined that Supervalu excels in distribution and logistics, not in retail operations or merchandising. Given that point of view, it would be hypocritical to find the acquisition of Albertsons’ food retail business appropriate…except, perhaps, as a stand alone, separately run and managed business unit, captive to Supervalu from a distribution contract point of view. Of course, history is littered with examples of “captive” customers creating inefficiencies and leading to a loss of competitive advantage for the supplier/owner. The trouble with captive distribution markets is that you don’t have to compete! The marketplace is awesome at making suppliers efficient, effective, and progressive. Captive channels are predictable in making suppliers inefficient, complacent, and stagnant. Can someone make Albertsons a viable investment? I think so, but I would rather see a Tesco, Carrefour, Metro AG or other multinational food retailer make the effort. Yes, our market is different from theirs. But so are many theirs from each other.
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