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Done Deal: Albertsons Sold

January 23, 2006Written by George Anderson

By George Anderson

The second go-round proved a charm as Supervalu, CVS and an investment group led by Cerberus Capital Management, that includes Kimco Realty, Schottenstein Stores Corp., Lubert-Adler Partners and Klaff Realty, have announced a successful bid to acquire all of Albertsons' holdings for $17.4 billion.

With the deal, Supervalu will become the second largest supermarket operator in the U.S. It will acquire the operations of Acme Markets, Bristol Farms, Jewel-Osco, Shaw's Supermarkets, Star Markets, and Albertsons stores in the Intermountain, Northwest and Southern California regions. All in-store pharmacies in those stores will also be included in the deal.

Jeff Noddle, chairman and CEO of Supervalu, who will be chairman and CEO of the newly expanded company, said in a released statement: "Today we have put in motion a series of actions that will dramatically transform Supervalu. We will realize a sizeable increase in our retail footprint and supply chain network, strengthening our ability to effectively compete in today's challenging grocery industry. The combination of operations will create a premier food retail powerhouse of 2,656 stores from coast to coast, tripling the size of our current retail operations. By adding prestigious supermarket nameplates across the country, each with strong market presence in their respective regions, we will have the critical mass and footprint to leverage the combined operations to become a more profitable business."

Mr. Noddle, who made a point of saying his company has successfully added retail banners in the past, said, "This acquisition is a strategic fit with Supervalu's approach of operating a diversified portfolio of regional banners - locally managed and branded - with strong prevailing market shares. We are also, of course, thrilled to join forces with a highly skilled employee base and look forward to building on our combined strengths, cultures and historical roots."

Earlier this month, Lehman Brothers Inc. analyst Meredith Adler went on record as supporting Supervalu in its bid for Albertsons. Calling the attempt to acquire large chunks of Albertsons "bold and transformational," she added in a letter to investors: "The state of the grocery industry requires such bold actions given its fundamentally slow growth and the intense competition coming from many directions."

CVS will add 700 stand-alone Sav-On and Osco drugstores in southern California, the Southwest and Midwest to its current operations. It will also takeover distribution center in La Habra, California. CVS will also acquire Albertsons ownership interests in the drugstore real estate.

Stores in Northern California, Florida, the Rocky Mountains and the Southwest will be taken over by the Cerberus-led group.

Moderator's Comment: What will this deal mean for Supervalu, CVS and the businesses they will eventually takeover from Albertsons? Will it change the competitive balance in the retail food and drug industries? - George Anderson - Moderator

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