Kroger to merge with Albertsons?

[ClownLoach]

What did Fleming do in Florida?

Fleming quit delivering to Kmart and that was one of the straws that drove Kmart to filing bankruptcy. It was going to happen anyway but when Fleming suspended deliveries that made it happen.

Was Kmart paying their bills? If not then Fleming should have stopped delivery. If they were then Fleming should have been sued out of business by Kmart.

Fleming was the source for all consumable goods for Kmart- this included all groceries, cleaning supplies, pet products. This excluded drug/HBA. Kmart was no longer self distributing any consumable items.

Kmart was to pay Fleming weekly. Kmart missed a scheduled payment, and Fleming stopped delivering. This was on January 21, 2002.

Kmart then filed bankruptcy on January 22, 2002. Kmart could not continue without consumable goods.

January 24, 2002, Fleming resumed shipping to Kmart once the bankruptcy court approved payments.

February 2003- Fleming and Kmart terminated their supply agreement, a contract rejection occurring as Kmart was still being bankrupt.

There is a lot more to the story there. Fleming involved itself with Kmart on the pie in the sky premise that Kmart would convert 1,200 or something of its stores to Super Kmarts. Instead when Kmart went bankrupt they closed half of the supercenters and many of the closures were those stores converted to Super Kmarts. This program wasn't going to work, the old dismal Kmarts were not going to make good conversions to include grocery, Fleming was a terrible wholesaler, and the entire idea and getting with Fleming was a very bad idea. In this regard Supervalu was very smart to let Fleming entertain Kmart; both were in the running to support Kmart in that supercenter conversion initiative.

April 2003- Flaming goes bankrupt

June-August 2003- Flaming essentially goes out of business as a grocery wholesaler, C&S wins the bid for most of the assets, but C&S quickly parceled many of the assets off to other wholesalers, and also did some asset trades with Supervalu in some regions (this is very important- who's to say C&S doesn't engage in similar sell off/trade transactions with divests from Kroger/Albertsons).

I would still foot the blame on Kmart for not paying their bills because they were out of money. So in effect Fleming cut them off because they had to, not because they intended to be malicious. And obviously they spun the yarn that they would have 1200+ Super K stores which would have misled Fleming to invest in the costly fixed infrastructure to service this large store base that never materialized, meaning that they were always going to be struggling with cash flow. Obviously Fleming wasn't very good either but it still sounds like the root cause was Kmart ineptitude.

I do wonder about the concern of C&S actually holding onto these stores. It sounds like it would be far more beneficial to them to sell these to regional operators, like selling California divests to Raleys or Save Mart while maintaining supply contracts. Their track record over time seems to be that they are short term holders and long term sellers, no retail asset stays on their books that long. They are like hiring a service to take over operations needed to facilitate your merger deal. But if the net results pan out appropriately and more qualified competitors wind up acquiring the stores than it works out.

What I would really like to know is what other chains submitted bids. Were these locations really shopped around appropriately to the best run regional chains as well as regionals "a couple of states away" who could potentially buy as a new market entry? Or was Kroger demanding a single buyer that takes all of their problems off their back regardless of how poorly the potential result could be? It really sounds like we need transparency to the public in all of these dealings because I wouldn't be the least bit surprised if C&S was the best buyer for Kroger versus for the customer. How could they be trusted not to choose a unknown like Haggen was, even though they're promising to jettison warehouses and regional management? (Don't tell me the #1 or so ranked leaders are going, more likely the #157th ranked person moves to C&S instead of going on a performance action)

[storewanderer]

I would still foot the blame on Kmart for not paying their bills because they were out of money. So in effect Fleming cut them off because they had to, not because they intended to be malicious. And obviously they spun the yarn that they would have 1200+ Super K stores which would have misled Fleming to invest in the costly fixed infrastructure to service this large store base that never materialized, meaning that they were always going to be struggling with cash flow. Obviously Fleming wasn't very good either but it still sounds like the root cause was Kmart ineptitude.

I do wonder about the concern of C&S actually holding onto these stores. It sounds like it would be far more beneficial to them to sell these to regional operators, like selling California divests to Raleys or Save Mart while maintaining supply contracts. Their track record over time seems to be that they are short term holders and long term sellers, no retail asset stays on their books that long. They are like hiring a service to take over operations needed to facilitate your merger deal. But if the net results pan out appropriately and more qualified competitors wind up acquiring the stores than it works out.

What I would really like to know is what other chains submitted bids. Were these locations really shopped around appropriately to the best run regional chains as well as regionals "a couple of states away" who could potentially buy as a new market entry? Or was Kroger demanding a single buyer that takes all of their problems off their back regardless of how poorly the potential result could be? It really sounds like we need transparency to the public in all of these dealings because I wouldn't be the least bit surprised if C&S was the best buyer for Kroger versus for the customer. How could they be trusted not to choose a unknown like Haggen was, even though they're promising to jettison warehouses and regional management? (Don't tell me the #1 or so ranked leaders are going, more likely the #157th ranked person moves to C&S instead of going on a performance action)

Yes, Kmart's inability to pay was on Kmart... no question about that. Fleming's agreement with Kmart was pretty bad though, nobody in their right mind would have agreed to what Kmart agreed to in that agreement (it is out there online somewhere). A lot of blame to go around for both parties but at the end of the day the biggest loser was Fleming since Fleming ended up out of business the following year and Kmart somehow was still somewhat "in business" up through about 2018 when store count fell below 500.

Raleys had a long history of doing business with Fleming in the 80's, 90's, etc. But that all stopped by the mid 90's. Raleys got involved with Certified/Unified/Supervalu/UNFI because they sold a drug distribution center to Unified right before Unified was sold to Supervalu so that put Raleys into buying a lot of drug items from Supervalu. Save Mart as I recall did not have a relationship with Fleming in the 80's, 90's, etc. and used Certified. However Save Mart purchased a block of Fleming F4L Stores in NorCal and initially Save Mart's intent was to continue to supply the F4L stores from Fleming and even keep using Best Yet private label, but Fleming's service levels were so awful that Save Mart had to take control of the supply arrangements itself and get rid of Fleming.

I also keep getting stuck on how C&S is basically paying HALF for the stores what Haggen paid for their stores on a "per store basis." And I really think C&S is getting better stores than Haggen got. Haggen's investors still made money just spinning the real estate/leases around and proceeds from that activity far washed away the losses they incurred operating the stores. Imagine how much C&S could make with such a lower per store purchase price...

I am sure Save Mart was the preferred buyer for Albertsons on the divests. This is why ex-Cerberus people own Save Mart and why Save Mart hired a bunch of Albertsons management to their company. They even hired Bob Miller for Chairman... I mean, there is no way that thing wasn't being set up to take on these stores being divested... The problem is Save Mart has some issues. Closing the pharmacies, those retiree benefit issues, some question as to how they would do with major growth... and we have no idea how their financials look.

But then this C&S threw a surprise bid out there and like you say for Kroger this looks like a great buyer. C&S I am confident has very solid financials. C&S being willing to take all of the stores and having strong financials probably pushed Kroger to say this is the buyer we want to present to the government for the divests.

I do think they could get some people to move over to C&S though. Kroger doesn't have the greatest reputation as an employer and I suspect there are Albertsons people who would seriously consider other options with C&S to go over there and retain seniority, etc. Then again a lot of people went to Haggen under those terms with an open mind too and completely screwed themselves.

[veteran+]

And let's not forget their activities in Florida.

What did Fleming do in Florida?

Fleming quit delivering to Kmart and that was one of the straws that drove Kmart to filing bankruptcy. It was going to happen anyway but when Fleming suspended deliveries that made it happen.

They finished destroying Pantry Pride (aka Food Fair) in Florida.

In 1994, Fleming formed Fleming Supermarkets of Florida, Inc. whereby it inherited a chain of supermarkets in Florida (operating as Hyde Park Markets and Wooley's Fine Foods) and launched them as a Healthy Gourmet upscale Market where diet, nutrition and recipe programs were incorporated and rolled out by the company's Chief Nutrition Director, Donna DeCunzo, R.D., L.D. under the name Hyde Park Market. The 11 store chain was sold off by 2000.

[Romr123]

Fleming had a long position in the Kansas City metro area and were a perfectly plausible wholesaler when I lived there '89-92....they had acquired and spun off some of the Milgram properties. They had some reasonable concepts (SunFresh, United Supers and IGA come to mind) and were a reasonable alternative to AWG for local operators...they clearly collapsed after that point.

[pseudo3d]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

Almost all the grocery store mergers since 1991 have been smaller, regional affairs. The closest to come without a big lawsuit was Albertsons/Safeway which led to the Haggen disaster and still left Kroger/Ralphs/whatever as the duopoly in most of the affected markets.

And I believe that there's a second group of stores that need to be sold in SoCal to pass muster, with C&S offered first dibs but so far no takers.

[ClownLoach]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

Almost all the grocery store mergers since 1991 have been smaller, regional affairs. The closest to come without a big lawsuit was Albertsons/Safeway which led to the Haggen disaster and still left Kroger/Ralphs/whatever as the duopoly in most of the affected markets.

And I believe that there's a second group of stores that need to be sold in SoCal to pass muster, with C&S offered first dibs but so far no takers.

Per Kroger C&S is already contracted to purchase any additional stores required for divestiture. Therefore there will be no other buyers. C&S has been given exclusive rights, and furthermore seemingly does not have right to refuse either.

This idea that hundreds of stores will close once again doesn't pass muster. The cost of acquisition per store up front is way too high, made worse by the giveaway prices they're giving C&S where they can't keep a store. You're talking about tens of millions per store acquired, plus the cost of rent they're going to have to take on. There is not a snowballs chance in hell that they close anything they buy because of the fact they're overpaying for ACI in the first place. When you factor in rent and assume average store has at least a decade or two of term you're looking at a cost of $30-$40 million a store to close one and keep it on the books as a dark store. No possibility that the sales transferred to other locations from the dark store will make up for that incredible cost they're sinking into it. There are many promises they're making that I don't find credible, but I do believe them when they say they're not going to close any stores (except that I expect the dog stores were conveniently be shuffled off to C&S in this first wave). When you grossly overpay for these assets the only chance to recoup the investment is to keep them open and collecting revenue and profits.

The problem I see is that by laying down so much money per ACI store it seems impossible to expect prices not to go up, but then we have to remember they're spending the shareholders money and not their own.

[wnetmacman]

Report says that the proposed divestitures should be fine with FTC based upon past precedent:

https://www.supermarketnews.com/retail- ... ure-report

I hope that regulators know that if this is approved they'll be sitting on 100 - 120 dark boxes in So Cal, 70 in Arizona, 25 in Nevada, 15 in Nevada, etc. even after all of the divestitures. Plus it will certainly lead to higher prices.

Almost all the grocery store mergers since 1991 have been smaller, regional affairs. The closest to come without a big lawsuit was Albertsons/Safeway which led to the Haggen disaster and still left Kroger/Ralphs/whatever as the duopoly in most of the affected markets.

And I believe that there's a second group of stores that need to be sold in SoCal to pass muster, with C&S offered first dibs but so far no takers.

Per Kroger C&S is already contracted to purchase any additional stores required for divestiture. Therefore there will be no other buyers. C&S has been given exclusive rights, and furthermore seemingly does not have right to refuse either.

While I have said that C&S can and very well might run the stores, I would suggest that none of you should be surprised should they end up selling them all off piecemeal to independents.

[ClownLoach]

Almost all the grocery store mergers since 1991 have been smaller, regional affairs. The closest to come without a big lawsuit was Albertsons/Safeway which led to the Haggen disaster and still left Kroger/Ralphs/whatever as the duopoly in most of the affected markets.

And I believe that there's a second group of stores that need to be sold in SoCal to pass muster, with C&S offered first dibs but so far no takers.

Per Kroger C&S is already contracted to purchase any additional stores required for divestiture. Therefore there will be no other buyers. C&S has been given exclusive rights, and furthermore seemingly does not have right to refuse either.

While I have said that C&S can and very well might run the stores, I would suggest that none of you should be surprised should they end up selling them all off piecemeal to independents.

I'm almost sure they'll be sold off. I do wonder if their deal to license the Albertsons name is non transferable though... It's bad enough they propose to have two sets of Albertsons again, let alone Albertsons (Kroger), Albertsons (C&S), and Albertsons (C&S Franchisee)

I still think the mass rebranding in SoCal will be a disaster, and furthermore I think we will be surprised to find far more Ralphs/F4L being divested than Albertsons/Vons, which means all those sold Ralphs become Albertsons, sold Vons become Albertsons, the kept Albertsons have to become Ralphs or Vons (more likely), and the sign companies get rich.

[storewanderer]

Per Kroger C&S is already contracted to purchase any additional stores required for divestiture. Therefore there will be no other buyers. C&S has been given exclusive rights, and furthermore seemingly does not have right to refuse either.

While I have said that C&S can and very well might run the stores, I would suggest that none of you should be surprised should they end up selling them all off piecemeal to independents.

I'm almost sure they'll be sold off. I do wonder if their deal to license the Albertsons name is non transferable though... It's bad enough they propose to have two sets of Albertsons again, let alone Albertsons (Kroger), Albertsons (C&S), and Albertsons (C&S Franchisee)

Actually 4 sets of Albertsons. There is Albertsons (United TX) in most of NM too which is completely different from the rest.

[ClownLoach]

While I have said that C&S can and very well might run the stores, I would suggest that none of you should be surprised should they end up selling them all off piecemeal to independents.

I'm almost sure they'll be sold off. I do wonder if their deal to license the Albertsons name is non transferable though... It's bad enough they propose to have two sets of Albertsons again, let alone Albertsons (Kroger), Albertsons (C&S), and Albertsons (C&S Franchisee)

Actually 4 sets of Albertsons. There is Albertsons (United TX) in most of NM too which is completely different from the rest.

At what point does Albertsons basically become Piggly Wiggly? We are making fun of that but this is no better with all these owners and licenses.