SpinCo

[storewanderer]

If SpinCo is all Albertsons assets and only 100-375 stores than I think it's clear to say that at a minimum, Kroger might be looking for a buyer for F4L/FoodsCo. Of all of the assets you mentioned, I think F4L / FoodsCo could be the most marketable and many less traditional operators, ethnic operators, foreign operators might be interested in bidding for that fleet of stores.

There is no vehicle to move Kroger assets to SpinCo the way this deal is drawn up.

The problem with F4L/FoodsCo and potential operators is F4L/FoodsCo operates union stores. These less traditional, ethnic, and foreign operators want nothing to do with a union. The union will fight any sale of those stores to potential non-union operators. Thing Bodega Latina as a buyer. They come in and say we are buying F4L/FoodsCo and will retain the name and format and operations. We will honor union agreements. Do you think the union will just say oh okay that is great and go back to the beach? No. The union will say- this is not an acceptable buyer. We are concerned they will close stores and convert them to non-union formats El Super, Smart & Final, or Smart & Final Extra. We do not accept this. We are going to stall and fight and delay. We will get CA Attorney General involved and they will sue too, sue to stop the whole merger over this. No. Not worth it. Better to just keep F4L/FoodsCo. It is already in the current Kroger ecosystem anyway.

For the SoCal and Chicago regions: Better to take 100-125 Vons/Albertsons/Pavilions Stores and 15-25 Jewel/Mariano Stores, spin them off to SpinCo, and proceed with the merger without any trouble.

This SpinCo thing is a very interesting proposal and the way it is designed is very wise.

[Romr123]

Agreed. There are a scattering of Marianos/Jewel/Ruler stores (I agree with your number) which are duplicative, poor performers, or actually do present a competitive issue. Also, I'm thinking of Bloomington-Normal with 3 stores each (Kroger/Jewel) or Bourbonnais with both Kroger and Jewel which can go into the SpinCo vehicle cleanly and show that it's not just the west coast seeing the upheaval.

[Bagels]

If SpinCo is all Albertsons assets and only 100-375 stores than I think it's clear to say that at a minimum, Kroger might be looking for a buyer for F4L/FoodsCo. Of all of the assets you mentioned, I think F4L / FoodsCo could be the most marketable and many less traditional operators, ethnic operators, foreign operators might be interested in bidding for that fleet of stores.

There is no vehicle to move Kroger assets to SpinCo the way this deal is drawn up.

The problem with F4L/FoodsCo and potential operators is F4L/FoodsCo operates union stores. These less traditional, ethnic, and foreign operators want nothing to do with a union. The union will fight any sale of those stores to potential non-union operators. Thing Bodega Latina as a buyer. They come in and say we are buying F4L/FoodsCo and will retain the name and format and operations. We will honor union agreements. Do you think the union will just say oh okay that is great and go back to the beach? No. The union will say- this is not an acceptable buyer. We are concerned they will close stores and convert them to non-union formats El Super, Smart & Final, or Smart & Final Extra. We do not accept this. We are going to stall and fight and delay. We will get CA Attorney General involved and they will sue too, sue to stop the whole merger over this. No. Not worth it. Better to just keep F4L/FoodsCo. It is already in the current Kroger ecosystem anyway.

For the SoCal and Chicago regions: Better to take 100-125 Vons/Albertsons/Pavilions Stores and 15-25 Jewel/Mariano Stores, spin them off to SpinCo, and proceed with the merger without any trouble.

This SpinCo thing is a very interesting proposal and the way it is designed is very wise.

Round 3: I read the actual press release. It clearly states that Kroger and Albertsons will work together to determine which stores to divest, and the divested stores will be spun off to as a new company tentatively named SpinCo to Albertsons shareholders at closing, with the value of SpinCo adjusting their final offering.

In other words, SpinCo is not limited to Albertsons assets, that’s a false assumption some reports have made. Legal analysis from one of the top trade publications speculates it’ll be comprised of the weakest stores, but thinks Kroger will make an attractive package - including agreeing to supply the stores at cost for X years - to win regulatory approval, especially given the geographic footprint will include “islands” in Colorado and Illinois.

I wouldn’t be surprised to see Kroger dump the entire F4L/FoodCo chain.

[jamcool]

I expect most of the Safeway and Albertsons stores in AZ to be spun off…the bulk in Phoenix and Tucson (which is Fry’s primary markets) and some in Northern Arizona (Prescott/Verde Valley/Flagstaff)plus the ABS/SWY warehouses/dairy plants in Metro Phoenix. The question is will Fry’s want to have the ex-Safeways in the small towns in AZ.

[HCal]

I doubt Kroger is going to "give" SpinCo any banners. That would require a massive rebranding of entire divisions, which is the last thing they want to do right now. If they want this merger to go through, they have to keep rebrandings to an absolute minimum in order to avoid public opposition.

At the most, they will give the spun off stores the rights to use their former brand names, perhaps indefinitely or perhaps for a certain number of years. If most of the SpinCo stores are Albertsons, Safeway or Vons (given that the western US is where there is the most overlap) then that might be feasible.

Something I've found interesting on this forum is the crazy speculation about sale of divisions to other operators, mass rebranding of stores, etc. In reality, they are going to want to rock the boat as little as possible. They will agree to sell off the minimum number of stores needed to secure antitrust approval, and keep everything else the same. Changing names of stores will just upset customers.

[pseudo3d]

If SpinCo is all Albertsons assets and only 100-375 stores than I think it's clear to say that at a minimum, Kroger might be looking for a buyer for F4L/FoodsCo. Of all of the assets you mentioned, I think F4L / FoodsCo could be the most marketable and many less traditional operators, ethnic operators, foreign operators might be interested in bidding for that fleet of stores.

There is no vehicle to move Kroger assets to SpinCo the way this deal is drawn up.

The problem with F4L/FoodsCo and potential operators is F4L/FoodsCo operates union stores. These less traditional, ethnic, and foreign operators want nothing to do with a union. The union will fight any sale of those stores to potential non-union operators. Thing Bodega Latina as a buyer. They come in and say we are buying F4L/FoodsCo and will retain the name and format and operations. We will honor union agreements. Do you think the union will just say oh okay that is great and go back to the beach? No. The union will say- this is not an acceptable buyer. We are concerned they will close stores and convert them to non-union formats El Super, Smart & Final, or Smart & Final Extra. We do not accept this. We are going to stall and fight and delay. We will get CA Attorney General involved and they will sue too, sue to stop the whole merger over this. No. Not worth it. Better to just keep F4L/FoodsCo. It is already in the current Kroger ecosystem anyway.

For the SoCal and Chicago regions: Better to take 100-125 Vons/Albertsons/Pavilions Stores and 15-25 Jewel/Mariano Stores, spin them off to SpinCo, and proceed with the merger without any trouble.

This SpinCo thing is a very interesting proposal and the way it is designed is very wise.

Judging by recent behavior by Kroger they'd probably be happy to use the merger to screw over unionized stores however possible. And unionized stores are in no way safe if this merger goes through.

And all that debt load isn't exactly encouraging to "yes, we will stay solvent enough to pay you and keep the operation going for the foreseeable future".

[retailfanmitchell019]

I doubt Kroger is going to "give" SpinCo any banners. That would require a massive rebranding of entire divisions, which is the last thing they want to do right now. If they want this merger to go through, they have to keep rebrandings to an absolute minimum in order to avoid public opposition.

In reality, they are going to want to rock the boat as little as possible. They will agree to sell off the minimum number of stores needed to secure antitrust approval, and keep everything else the same. Changing names of stores will just upset customers.

I don't think Kroger would want to run around 50 banners.
My idea/roadmap would be (some would agree with me on this):
SpinCo should include all of the Albertsons brand stores (maybe not the Southern Divsion Albertsons stores, which could be HEB's entrance ticket into D/FW), along with Vons, and maybe the Safeway/Carrs stores in Alaska. The Vons name could be eliminated in inland SoCal/OC and perhaps parts of San Diego County. Safeway/Eagle stores in Alaska should all be rebranded to Carrs.
SpinCo should take the Albertsons store brands like Signature Select, maybe eliminating that and going back to the Albertsons brand.
As soon as the ink dries out on the merger deal in 2024, SpinCo should be scooped up by Loblaws as a permanent home for the Albertsons and Vons banners. Loblaws is a great Canadian retailer that has a lot of potential to expand south of their border. Excellent private label (President's Choice).

Kroger meanwhile? Once the ink dries out, they should clean house and kill off irrelevant banners like QFC (replace that with Safeway),
Andronico's and Pak N Save (replace that with Safeway)
Tom Thumb and Market Street (replace that with Kroger),
Jay C and PayLess in Indiana (replace that with Kroger),
Lucky in UT (replace that with Smith's),
Safeway in AZ (replace that with Fry's),
Safeway in NV/NM/ID/MT (replace that with Smith's),
Safeway in CO/NE/WY/SD (replace that with King Soopers or City Market, and maybe kill off City Market entirely),
Safeway Eastern Seaboard (replace that with Harris Teeter),
Baker's in Omaha (replace that with Dillons),
Gerbes in central Missouri (replace that with Dillons),
Mariano's (replace that with Jewel),
Metro Market in Milwaukee (replace that with Pick n Save).
Star Market ("Stah Mahket" ) in Boston (replace that with Shaw's)
Balducci's and Kings (replace both with Acme)
Kroger should offload Fred Meyer Jewelers too. Food 4 Less/Foods Co./Rvler should be dumped off in a separate transaction to UNFI (successor to SVU/Unified). Amigos should be sold to Fiesta Mart.
Fred Meyer will be here to stay.

When all is said and done, Kroger will have 14 banners left:
Dillons
Fred Meyer
Fry's
Harris Teeter
King Soopers
Kroger
Pick n Save
Ralphs
Smith's
Safeway
Jewel
Acme
Shaw's
United

[marketreportblog]

Andronico's and Pak N Save (replace that with Safeway)
Tom Thumb and Market Street (replace that with Kroger),
Jay C and PayLess in Indiana (replace that with Kroger),
Lucky in UT (replace that with Smith's),
Safeway in AZ (replace that with Fry's),
Safeway in NV/NM/ID/MT (replace that with Smith's),
Safeway in CO/NE/WY/SD (replace that with King Soopers or City Market, and maybe kill off City Market entirely),
Safeway Eastern Seaboard (replace that with Harris Teeter),
Baker's in Omaha (replace that with Dillons),
Gerbes in central Missouri (replace that with Dillons),
Mariano's (replace that with Jewel),
Metro Market in Milwaukee (replace that with Pick n Save).
Star Market ("Stah Mahket" ) in Boston (replace that with Shaw's)
Balducci's and Kings (replace both with Acme)

Not sold on those last two conversions. Remember that many of the existing Star Markets today were opened as or converted to Shaw's during the roughly 2007-2013ish period (late Supervalu era) and were switched back to Star Market in an effort to distinguish the stores; more urban and higher-end. That, of course, could be accomplished with a name change like "Shaw's Fresh Fare," if we're using Kroger brands, or "Shaw's CityMarket" or something... Meanwhile, a similar approach would have to be taken for Kings and Balducci's. As for those, remember that these stores are relatively tiny -- some as small as the 10-15,000 square foot range -- and positioned as gourmet markets, especially Balducci's. Honestly, I don't see Kroger being very interested in those stores which require (or ought to) genuinely different branding and operation. The Star Markets seem to be pretty high volume, based on my time living in Boston, but the Kings and Balducci's are extremely low-volume. I don't see why Kroger would want to hang onto these extremely small, specialized, and generally outdated stores so I would see them keeping Star Market but selling or closing most of Kings and Balducci's. There are, of course, some good stores they'd want to keep but the majority are pretty much losers.

And I suppose a similar argument could be made for Andronico's, given that those stores were in fact branded Safeway (Community Markets) briefly and it went rather poorly. I assume they'd want to not repeat those branding mistakes.

[storewanderer]

More on SpinCo when you read the merger agreement:
Can affirmatively say that yes, this was drawn up to include stores from both Albertsons and Kroger in SpinCo. They even have a different way of defining profitability depending on which chain the stores came from:

From the Merger Agreement (available https://www.krogeralbertsons.com/resources under the SEC Filings link)
Agreement defines "Parent" as Kroger and "Company" as Albertsons.


Page 9 of merger agreement:
"“Four-Wall EBITDA” means, for the thirteen four-week periods ending on the last day of
the four-week period nearest to, and at least thirty (30) days prior to, the Closing Date, (i) with respect to
a Company Store, Store-level retail EBITDA (including as it relates to any fuel center associated with
such Store) for such period, excluding allocated division and corporate overhead costs, and (ii) with
respect to a Parent Store, EBITDA (including as it relates to any fuel center associated with such Store)
as reported on such Store’s operating statement for such period, excluding intracompany rent costs,
division overhead allocation costs, corporate overhead allocation costs and technology allocation costs, in
each case of clauses (i) and (ii), calculated in a manner consistent with the historical methodology and
practice of the Company and Parent, as applicable, in each case of (i) and (ii) in accordance with an
illustrative example set forth in Section 1.1(a) of the Company Disclosure Letter."

Other thing is the agreement allows them to call off the entire deal if they have to divest more than 650 stores....

So if I were FTC, I'd be pushing for 650 stores divested. This 100-375 stores number is clearly a lowball.

[retailfanmitchell019]

More on SpinCo when you read the merger agreement:
Can affirmatively say that yes, this was drawn up to include stores from both Albertsons and Kroger in SpinCo. They even have a different way of defining profitability depending on which chain the stores came from:

So if I were FTC, I'd be pushing for 650 stores divested. This 100-375 stores number is clearly a lowball.

Well then, with that in mind, QFC could go into SpinCo along with Albertsons/Vons stores. Albertsons would have what it wanted to do 25 years ago - acquire QFC.

On an off-topic side note, I changed my avatar to the National Tea logo.