Wednesday, December 07, 2005

Update on Albertson's

It looks as though three bids have been submitted for Albertson's. It will be the end of December before we hear if any of them have been accepted.

I looks like Kroger has taken a pass on Albertson's and that Supervalu has joined the group. Supervalu, a Minneapolis wholesaler, has joined with Cerebus Capitol Management and Kimco Realty in making a bid. Hmmmmm. A Whole sale grocer, a money manger and a realty firm. Just where does Albertson's stand with these guys?

Then there is the team of KKR (famous for the RJR Nabisco fiasco), Apollo Management and Texas Pacific Group. Apollo Management is the firm that acquired Borden Chemicals last year. They are a described to the press as a provaste investment management company. Borden is now listed as an operating company of Apollo Management. Texas Pacific Group is an investment firm described by Hoover's in this way: "Texas Pacific Group (TPG) has staked its claim on the buyout frontier with a reputation for roping in companies other investors wouldn't touch with a 10-foot pole. TPG, an active investor with over $20 billion under management, often takes control of the companies in which it invests. The firm is generally interested in resuscitating well-known consumer and luxe brands that have fallen on hard times." I would be very interested in seeing that bid for certain, and seeing who's giving what in what percentages.

Third is the Yucaipa Companies with Dubai Investment Group. Dubai??? Yes, they are an international real estate investment firm. They have 26,500 investors on record. Their focus is real estate. Albertson's owns quite a bit of real estate. Real estate that is believed to be under-utilized in the real estate market. Yucaipa Companies is the only grocery based investment firm in the group. From Hoover's: "Yucaipa has a hungry eye for picking out ripe bargains in different industries, but made its name with grocery stores. The investment company forged its reputation as the ultimate grocery shopper, executing a series of grocery chain mergers and acquisitions that put the company on the supermarket map. The Yucaipa Companies owns Jurgensen's, Falley's, and Alpha Beta, among other chains. The company's chairman, billionaire Ron Burkle, is a prominent Democratic activist and fundraiser; former president Bill Clinton and the Rev. Jesse Jackson serve on the company's board." I would venture to say the Yucaipa Companies couldn't compete on its own in this negotiation and has put together a bid with Dubai on the agreement that some real estate and under-performing store will be closed and sold off. Others will be kept alive and remodeled to increase market share. Purely specualtion on my part, but I've seen this type of deal before.

Then there is the bell of the ball in all these negotiations. Bristol Farms. Bristol just announced last week the acquisition of Lazy Acres. Lazy Acres is a natural and organic grocer with a 19,000 square foot store in Santa Barbara. They have been in operation since 1991. Bristol will keep the Lazy Acres name and has pledged to open additional location throughout the Santa Barbara area.

UPDATE: The Yucaipa offer was classified as timid. Albertson's had their hopes pinned on the Supervalu bid and still is hoping for a firm offer from them. However, the only tabled bid was from the KKR bid. Albertson's had asked for a "whole company" deal, KKR/Apollo were the only firm to deliver just that. Unfortunately it was not the price they were expecting, yet it is close. All I can say about these developements is that if I were Kevin Davis I'd be very concerned.

2nd Update: It looks as though there is now clear winner to the bidding auction. There is large speculation that the company will be broken apart at sale. The Jewel/Osco division going to none other than CVS. The grocery portion possibly will be split between Kroger and Safeway, an east/west divide.