🛒 Kroger-Albertsons Merger: National Impact

[pseudo3d]

I forgot completely about Lawrence Brothers. They received divests in the Albertsons LLC/United purchase. And some of those did indeed fail.

Oh, they were the purchasers? There were only two stores. They reopened the Wichita Falls store (2720 Southwest Pkwy.) as Cash Saver when it was sold in January 2014, then it closed in January 2019...and United Supermarkets reopened it in May 2023 (oops). 2220 South Bell St. in Amarillo closed late in 2019 and is now a Tru Fit (not even a grocery retailer). So the two divested stores became either the same company that merged, or not a grocery store at all.

They weren't a great operator...those two were probably their largest stores, and the United purchase stripped out about half of their remaining stores (and it seems they took their time to clear out a few others as well), leaving them with the Cash Saver stores and the smallest, dinkiest stores in the chain (not that the stores that they took weren't already dinky--12k square feet supermarkets, anyone?).

So somebody at the FTC remembered Lawrence Brothers as a divestment, and that was a dud as far as being a competent operator....and C&S seems to be quiet on this whole thing. If they were really intent on running and keeping 400+ stores they'd better make some show of it. (Implying that they'd run some as Piggly Wiggly isn't exactly instilling confidence.)

[storewanderer]

I forgot completely about Lawrence Brothers. They received divests in the Albertsons LLC/United purchase. And some of those did indeed fail.

Oh, they were the purchasers? There were only two stores. They reopened the Wichita Falls store (2720 Southwest Pkwy.) as Cash Saver when it was sold in January 2014, then it closed in January 2019...and United Supermarkets reopened it in May 2023 (oops). 2220 South Bell St. in Amarillo closed late in 2019 and is now a Tru Fit (not even a grocery retailer). So the two divested stores became either the same company that merged, or not a grocery store at all.

They weren't a great operator...those two were probably their largest stores, and the United purchase stripped out about half of their remaining stores (and it seems they took their time to clear out a few others as well), leaving them with the Cash Saver stores and the smallest, dinkiest stores in the chain (not that the stores that they took weren't already dinky--12k square feet supermarkets, anyone?).

So somebody at the FTC remembered Lawrence Brothers as a divestment, and that was a dud as far as being a competent operator....and C&S seems to be quiet on this whole thing. If they were really intent on running and keeping 400+ stores they'd better make some show of it. (Implying that they'd run some as Piggly Wiggly isn't exactly instilling confidence.)

That Pig I went to in WI last year was so poor... it instills NO confidence that C&S would talk about running any divests as Pig. Just a poorly priced/assorted store. Had some loyalty card required for sale prices. I didn't even buy anything due to not wanting to mess around with a mandatory loyalty card at a store I will not go back to anytime soon. It was clean, staffed, fresh areas didn't look awful but were completely unappealing. Worse than what Haggen tried to push off in SoCal by far (they did TRY to run with some high quality fresh items but lack of traffic quickly screwed those ideas up).

I am glad someone remembered Lawrence Brothers.

Maybe next someone can remember Minyard. Since that was actually more stores.

Other option is to go back to the SpinCo plan... and give it real assets. Transition the entire Albertsons private label program to it. Transition the entire exclusive use anywhere of the Vons/Albertsons/Marianos/QFC banners to it. Design the divest program so as few stores as possible have to go through a banner change even if that means a great Albertsons gets divested and a lousy Ralphs nearby gets kept.

[pseudo3d]

I forgot completely about Lawrence Brothers. They received divests in the Albertsons LLC/United purchase. And some of those did indeed fail.

Oh, they were the purchasers? There were only two stores. They reopened the Wichita Falls store (2720 Southwest Pkwy.) as Cash Saver when it was sold in January 2014, then it closed in January 2019...and United Supermarkets reopened it in May 2023 (oops). 2220 South Bell St. in Amarillo closed late in 2019 and is now a Tru Fit (not even a grocery retailer). So the two divested stores became either the same company that merged, or not a grocery store at all.

They weren't a great operator...those two were probably their largest stores, and the United purchase stripped out about half of their remaining stores (and it seems they took their time to clear out a few others as well), leaving them with the Cash Saver stores and the smallest, dinkiest stores in the chain (not that the stores that they took weren't already dinky--12k square feet supermarkets, anyone?).

So somebody at the FTC remembered Lawrence Brothers as a divestment, and that was a dud as far as being a competent operator....and C&S seems to be quiet on this whole thing. If they were really intent on running and keeping 400+ stores they'd better make some show of it. (Implying that they'd run some as Piggly Wiggly isn't exactly instilling confidence.)

That Pig I went to in WI last year was so poor... it instills NO confidence that C&S would talk about running any divests as Pig. Just a poorly priced/assorted store. Had some loyalty card required for sale prices. I didn't even buy anything due to not wanting to mess around with a mandatory loyalty card at a store I will not go back to anytime soon. It was clean, staffed, fresh areas didn't look awful but were completely unappealing. Worse than what Haggen tried to push off in SoCal by far (they did TRY to run with some high quality fresh items but lack of traffic quickly screwed those ideas up).

Haggen did try to spruce up the store interiors a bit, like new flooring and lighting around the checkstands. (These were kept when they were converted back to Albertsons/Safeway/Vons).

I am glad someone remembered Lawrence Brothers.

Maybe next someone can remember Minyard. Since that was actually more stores.

Minyard would've been better when it was, you know, an actual chain. According to Wikipedia, in 1996, they were the third-largest grocery chain in Dallas-Fort Worth, behind Tom Thumb and Albertsons. (One wonders why Kroger was not even top three, and if Kroger was mulling a market exit). By the time 2015 rolled around, Minyard was now owned by "RLS Investments", and was now in mostly lower-end neighborhoods.

The stores there seemed to sell before they were closed. One store was sold to Kroger (which closed it within a year), several were sold to H-E-B and never reopened as anything, and a few got converted to Fiesta Mart which also would close them. (Fiesta seemed to be a poor operator for the former Minyard stores, such as the Irving store*).

Other option is to go back to the SpinCo plan... and give it real assets. Transition the entire Albertsons private label program to it. Transition the entire exclusive use anywhere of the Vons/Albertsons/Marianos/QFC banners to it. Design the divest program so as few stores as possible have to go through a banner change even if that means a great Albertsons gets divested and a lousy Ralphs nearby gets kept.

I don't think so. Any SpinCo plan would probably also dumping a lot of debt on it and make it almost impossible to run as a chain. AppleTree, for instance (the spin-off of Safeway's Houston Division) kept most of the facilities of Safeway but was laden with debt and had a difficult time keeping up with the rest of the competition in Houston at the time.

_{* For clarification, this was not a former divested store.}

[ClownLoach]

Oh, they were the purchasers? There were only two stores. They reopened the Wichita Falls store (2720 Southwest Pkwy.) as Cash Saver when it was sold in January 2014, then it closed in January 2019...and United Supermarkets reopened it in May 2023 (oops). 2220 South Bell St. in Amarillo closed late in 2019 and is now a Tru Fit (not even a grocery retailer). So the two divested stores became either the same company that merged, or not a grocery store at all.

They weren't a great operator...those two were probably their largest stores, and the United purchase stripped out about half of their remaining stores (and it seems they took their time to clear out a few others as well), leaving them with the Cash Saver stores and the smallest, dinkiest stores in the chain (not that the stores that they took weren't already dinky--12k square feet supermarkets, anyone?).

So somebody at the FTC remembered Lawrence Brothers as a divestment, and that was a dud as far as being a competent operator....and C&S seems to be quiet on this whole thing. If they were really intent on running and keeping 400+ stores they'd better make some show of it. (Implying that they'd run some as Piggly Wiggly isn't exactly instilling confidence.)

That Pig I went to in WI last year was so poor... it instills NO confidence that C&S would talk about running any divests as Pig. Just a poorly priced/assorted store. Had some loyalty card required for sale prices. I didn't even buy anything due to not wanting to mess around with a mandatory loyalty card at a store I will not go back to anytime soon. It was clean, staffed, fresh areas didn't look awful but were completely unappealing. Worse than what Haggen tried to push off in SoCal by far (they did TRY to run with some high quality fresh items but lack of traffic quickly screwed those ideas up).

Haggen did try to spruce up the store interiors a bit, like new flooring and lighting around the checkstands. (These were kept when they were converted back to Albertsons/Safeway/Vons).

I am glad someone remembered Lawrence Brothers.

Maybe next someone can remember Minyard. Since that was actually more stores.

Minyard would've been better when it was, you know, an actual chain. According to Wikipedia, in 1996, they were the third-largest grocery chain in Dallas-Fort Worth, behind Tom Thumb and Albertsons. (One wonders why Kroger was not even top three, and if Kroger was mulling a market exit). By the time 2015 rolled around, Minyard was now owned by "RLS Investments", and was now in mostly lower-end neighborhoods.

The stores there seemed to sell before they were closed. One store was sold to Kroger (which closed it within a year), several were sold to H-E-B and never reopened as anything, and a few got converted to Fiesta Mart which also would close them. (Fiesta seemed to be a poor operator for the former Minyard stores, such as the Irving store*).

Other option is to go back to the SpinCo plan... and give it real assets. Transition the entire Albertsons private label program to it. Transition the entire exclusive use anywhere of the Vons/Albertsons/Marianos/QFC banners to it. Design the divest program so as few stores as possible have to go through a banner change even if that means a great Albertsons gets divested and a lousy Ralphs nearby gets kept.

I don't think so. Any SpinCo plan would probably also dumping a lot of debt on it and make it almost impossible to run as a chain. AppleTree, for instance (the spin-off of Safeway's Houston Division) kept most of the facilities of Safeway but was laden with debt and had a difficult time keeping up with the rest of the competition in Houston at the time.

_{* For clarification, this was not a former divested store.}

The SpinCo plan was a borderline facetious offering that obviously would not work as it would require billions of dollars in immediate cash to establish IT systems and processes, begin making purchases, etc. It could not spin by banner especially in SoCal for reasons previously discussed such as the oddity of large clusters of Vons in some areas, Albertsons in others etc. that would amount to full market exits in some areas and leave massive overlaps in others if done only by brand. And on top of that it surely would have received the "less productive stores" coupled with proportional debt. So they could have been given the bottom 25% of the chains coupled with an even 25% of the debts, but those bottom performers might have delivered far less than 25% of the revenue. A guaranteed recipe for disaster as the debt service would smother the company and prevent them from establishing any real credit lines and vendor relationships. The entire SpinCo concept was designed to be the asterisk next to "we promise not to let anyone go or close any stores/warehouses after the two companies are merged"*. (*because everything we wanted to close in the merger now belongs to SpinCo, leaving us with less debt for more executive bonuses while we laugh and watch SpinCo implode). They laughably assigned one executive to SpinCo who probably was given the job as a transitional role before retirement. This was never a real option, nor was the bizarre concept posted thousands of times that a SpinCo would occur and then be bought out by another chain in a multi-billion dollar deal. The buyer would have already passed on buying all the same stores for as little as a dollar each, most likely 90% less total while being sold without proportional debt.

[wnetmacman]

The stores there seemed to sell before they were closed. One store was sold to Kroger (which closed it within a year), several were sold to H-E-B and never reopened as anything, and a few got converted to Fiesta Mart which also would close them. (Fiesta seemed to be a poor operator for the former Minyard stores, such as the Irving store*).

I don't think so. Any SpinCo plan would probably also dumping a lot of debt on it and make it almost impossible to run as a chain. AppleTree, for instance (the spin-off of Safeway's Houston Division) kept most of the facilities of Safeway but was laden with debt and had a difficult time keeping up with the rest of the competition in Houston at the time.

_{* For clarification, this was not a former divested store.}

Minyard was long a third-tier operation in the Metroplex. While they operated some nice stores at one time, they were never on par with Tom Thumb, Albertsons, Kroger, or even Safeway when they were there. In fact, many Safeway stores that nobody really wanted became Minyard in the 1987 exit. Very little of the older Minyard store base survives in any form, and most of the good part of Minyard (Sack N Save and Carnival) were sold to other operators; that's how Fiesta really bloomed in Dallas.

You can't really use AppleTree as a good comparison to Haggen and C&S. AppleTree was not a Safeway divestment; it was a management buyout by Houston Safeway former management. Thus, they saddled themselves with that they were never able to fully shake, adding in an aging store base and too small to beat Kroger and others at their own game did them in. Safeway just was smart enough to know they were about to be in a real mess if they stayed in Houston, much like their Dallas exit; Dallas was just the only division they were not able to sell whole, because it was truly becoming a dog. Oklahoma sold whole to Homeland, who has had to reinvent themselves many times over (and made several trips to the bankruptcy court in the process) to the point that they are really not the original company. Little Rock became Harvest Foods, and died a similar death to AppleTree, though they did experience a little growth and acquisitions via Skaggs' exit from Arkansas. Over time, Safeway really became an exit expert - sell it before you lose it.

[pseudo3d]

The stores there seemed to sell before they were closed. One store was sold to Kroger (which closed it within a year), several were sold to H-E-B and never reopened as anything, and a few got converted to Fiesta Mart which also would close them. (Fiesta seemed to be a poor operator for the former Minyard stores, such as the Irving store*).

I don't think so. Any SpinCo plan would probably also dumping a lot of debt on it and make it almost impossible to run as a chain. AppleTree, for instance (the spin-off of Safeway's Houston Division) kept most of the facilities of Safeway but was laden with debt and had a difficult time keeping up with the rest of the competition in Houston at the time.

_{* For clarification, this was not a former divested store.}

Minyard was long a third-tier operation in the Metroplex. While they operated some nice stores at one time, they were never on par with Tom Thumb, Albertsons, Kroger, or even Safeway when they were there. In fact, many Safeway stores that nobody really wanted became Minyard in the 1987 exit. Very little of the older Minyard store base survives in any form, and most of the good part of Minyard (Sack N Save and Carnival) were sold to other operators; that's how Fiesta really bloomed in Dallas.

You can't really use AppleTree as a good comparison to Haggen and C&S. AppleTree was not a Safeway divestment; it was a management buyout by Houston Safeway former management. Thus, they saddled themselves with that they were never able to fully shake, adding in an aging store base and too small to beat Kroger and others at their own game did them in. Safeway just was smart enough to know they were about to be in a real mess if they stayed in Houston, much like their Dallas exit; Dallas was just the only division they were not able to sell whole, because it was truly becoming a dog. Oklahoma sold whole to Homeland, who has had to reinvent themselves many times over (and made several trips to the bankruptcy court in the process) to the point that they are really not the original company. Little Rock became Harvest Foods, and died a similar death to AppleTree, though they did experience a little growth and acquisitions via Skaggs' exit from Arkansas. Over time, Safeway really became an exit expert - sell it before you lose it.

Safeway wasn't a lost cause in the divisions it divested (though like in the case of Albertsons c. 2001 required far more resources than they had at the moment). In Dallas' division specifically it was far older than the Houston division and had some really crummy stores. I'm not sure if Houston could've worked out or not--the Austin division was even #2 for a while behind H-E-B, Kroger had fallen behind Safeway briefly and was considering leaving (with Kroger's tighter financials back then and labor issues), and Randalls, though dominant, had difficulty connecting to working-class shoppers, both between their non-union stance and ostentatious stores. (I'm told there was in fact some sort of culture clash within Randalls, between upscale and downscale, that's why in the early 1990s you had Randalls building palaces and then turning right around and reopening old Safeway/AppleTree sites). If Safeway had been able to displace Kroger entirely, then it might've worked...but by the early 1990s Kroger was firing back with its new Signature stores (taking a lot of the good ideas from New Generation, cutting the most labor-intensive/fancy parts, and creating a format that was higher-end without being pretentious...better locations helped too). I'm not sure that Safeway management would've had the foresight to go ahead in the Houston Division to fire back specifically like Kroger did. It's more than market share though, I've heard that the Dallas division had some high labor costs...and that also factored into Safeway's later decision to kill Dominick's and spare Texas. Dominick's had higher market share but was much more expensive to run.

In any case, AppleTree is a good example that leaving a company with a lot of debt is not a way to start a chain, even if in the case of AppleTree the idea wasn't to leave the chain for dead, as they got a LOT more benefits than SpinCo ever would (such as Safeway's best stores in the market). The end result right now is that short of a virtual de-merger of Fred Meyer Inc. (which won't happen), it's almost impossible to find enough divestment partners.

[wnetmacman]

Safeway wasn't a lost cause in the divisions it divested

I kind of disagree.

The Dallas division was plagued with a union instability that was threatening the whole company - not just that division. When you combine that with an older and smaller store base containing mostly in-town, non-suburban stores, in the late 80's, it was a recipe for disaster. Adding to this complexity was an owner (KKR) who had no business owning something as large as Safeway, and only wanting what all investors want - ROI.

If Safeway had been able to displace Kroger entirely, then it might've worked...but by the early 1990s Kroger was firing back with its new Signature stores (taking a lot of the good ideas from New Generation, cutting the most labor-intensive/fancy parts, and creating a format that was higher-end without being pretentious...better locations helped too). I'm not sure that Safeway management would've had the foresight to go ahead in the Houston Division to fire back specifically like Kroger did. It's more than market share though, I've heard that the Dallas division had some high labor costs...and that also factored into Safeway's later decision to kill Dominick's and spare Texas. Dominick's had higher market share but was much more expensive to run.

Kroger was not building Signature stores during the 1987-90 Safeway implosion, though it's fair to say that with the exception of Oklahoma, they have been the largest long-term beneficiary of it all.

In any case, AppleTree is a good example that leaving a company with a lot of debt is not a way to start a chain, even if in the case of AppleTree the idea wasn't to leave the chain for dead, as they got a LOT more benefits than SpinCo ever would (such as Safeway's best stores in the market). The end result right now is that short of a virtual de-merger of Fred Meyer Inc. (which won't happen), it's almost impossible to find enough divestment partners.

This is the part I think you're missing - AppleTree wasn't left with anything by anyone but themself. Every business starts with debt of some sort, unless you're financing with cash you already had from somewhere else. AppleTree management did not have that luxury, and in fact part of that debt was most likely from having to pay Safeway to use the name for a couple of years until they figured out their identity - by which point they were in too deeply to pull out of it.

In any event, the Kroger-Albertsons marriage will probably soon be off unless Kroger pays off the judges. They stand to lose the most if it fails.

[pseudo3d]

The Dallas division was plagued with a union instability that was threatening the whole company - not just that division. When you combine that with an older and smaller store base containing mostly in-town, non-suburban stores, in the late 80's, it was a recipe for disaster. Adding to this complexity was an owner (KKR) who had no business owning something as large as Safeway, and only wanting what all investors want - ROI.

Part of Safeway's spinoffs almost certainly had to do with KKR's 1989 acquisition, RJR Nabisco, which KKR began to slash, including Del Monte Foods, their UK division, and others. Selling Safeway as a public company in 1990 was probably part of this fallout.

Kroger was not building Signature stores during the 1987-90 Safeway implosion, though it's fair to say that with the exception of Oklahoma, they have been the largest long-term beneficiary of it all.

My point is that during that time Kroger was having issues of its own. If Safeway had played its cards right with a fair bit of luck, it could've been Kroger that might've been bumped off in the late 1980s in Houston. By the time AppleTree announced its sale of the stores in the late 1993, Kroger had put itself back together and secured itself for the future.

part of that debt was most likely from having to pay Safeway to use the name for a couple of years until they figured out their identity - by which point they were in too deeply to pull out of it.

The banks owned AppleTree from day one (the AppleTree name came about a year later, with the branding created out of house). They actually didn't keep the facilities (they owned a lot of stuff inside but they were leased from Safeway at a tune of $400k a month), and had to deal with a fairly torturous time including a long strike.

In any event, the Kroger-Albertsons marriage will probably soon be off unless Kroger pays off the judges. They stand to lose the most if it fails.

Not really. Kroger loses the least. Unless Kroger has a large termination fee owed to Albertsons, they get to walk away without adding a bunch of debt and still keep their #1/close #2 in their markets. Sure, they don't get NorCal, but if they were really desperate for NorCal representation then it might be worth making some calls to Save Mart. Apollo is in a worse state (they don't get their payday promised from Kroger, nor get to saddle them with debt), and of course Albertsons is still threatened as long as Apollo hangs over them. Unless a new potential owner appears out of the woodwork that would pose less of an issue, or Apollo sells its shares and walks away, the company is in danger.

[wnetmacman]

Unless Kroger has a large termination fee owed to Albertsons

Section 8.4d of the SEC filing. Kroger is the parent in the agreement:

" As used herein, “Company Termination Fee” means a cash amount equal to $318,000,000. As used herein, “Parent Termination Fee” means a cash amount equal to $600,000,000."

Kroger has essentially bet the farm, win or lose.

[ClownLoach]

The Dallas division was plagued with a union instability that was threatening the whole company - not just that division. When you combine that with an older and smaller store base containing mostly in-town, non-suburban stores, in the late 80's, it was a recipe for disaster. Adding to this complexity was an owner (KKR) who had no business owning something as large as Safeway, and only wanting what all investors want - ROI.

Part of Safeway's spinoffs almost certainly had to do with KKR's 1989 acquisition, RJR Nabisco, which KKR began to slash, including Del Monte Foods, their UK division, and others. Selling Safeway as a public company in 1990 was probably part of this fallout.

Kroger was not building Signature stores during the 1987-90 Safeway implosion, though it's fair to say that with the exception of Oklahoma, they have been the largest long-term beneficiary of it all.

My point is that during that time Kroger was having issues of its own. If Safeway had played its cards right with a fair bit of luck, it could've been Kroger that might've been bumped off in the late 1980s in Houston. By the time AppleTree announced its sale of the stores in the late 1993, Kroger had put itself back together and secured itself for the future.

part of that debt was most likely from having to pay Safeway to use the name for a couple of years until they figured out their identity - by which point they were in too deeply to pull out of it.

The banks owned AppleTree from day one (the AppleTree name came about a year later, with the branding created out of house). They actually didn't keep the facilities (they owned a lot of stuff inside but they were leased from Safeway at a tune of $400k a month), and had to deal with a fairly torturous time including a long strike.

In any event, the Kroger-Albertsons marriage will probably soon be off unless Kroger pays off the judges. They stand to lose the most if it fails.

Not really. Kroger loses the least. Unless Kroger has a large termination fee owed to Albertsons, they get to walk away without adding a bunch of debt and still keep their #1/close #2 in their markets. Sure, they don't get NorCal, but if they were really desperate for NorCal representation then it might be worth making some calls to Save Mart. Apollo is in a worse state (they don't get their payday promised from Kroger, nor get to saddle them with debt), and of course Albertsons is still threatened as long as Apollo hangs over them. Unless a new potential owner appears out of the woodwork that would pose less of an issue, or Apollo sells its shares and walks away, the company is in danger.

I would expect that Apollo will at the very least force Albertsons to refinance all of their debts with them. Didn't we all read that Albertsons needs to do this in the next few years as they have a big loan coming due? Of course because interest rates are high right now Apollo will be getting paid much more than Albertsons current financiers and if they struggle to pay then they can just foreclose on the whole company and take it over in bankruptcy. Apollo has already sunk their teeth into this company and they're not going to let go. They have too many ways to make a profit here, and it's entirely possible that they might make just as much money with no merger due to the immediate refinancing needs of Albertsons. With those new loans they will also want seats on the board to protect their interests, and those board members will eventually force the C-Suite to be emptied out and replaced with Apollo's people who will do even more to benefit Apollo over Albertsons itself. I don't understand how it's even legal, but if they get enough shares then they will not have any opposition.