Kroger to merge with Albertsons?

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Re: Kroger to merge with Albertsons?

Post by storewanderer »

pseudo3d wrote: December 2nd, 2022, 10:53 pm

Now that Sankaran has testified that Albertsons' finances are good, it would be difficult to smash the company into pieces immediately "for financial reasons" if the merger falls through lest Sankaran gets accused of perjury. And Cerberus' impatience drove them into this mess...no way they'd allow a slow Lampert-style liquidation while maintaining the pretense that the company could be "restored to profitability" by "reshaping the company" or whatever Lampert's excuse was.

Fortunately for Cerberus they have three real options:

1) Dump Sankaran and install someone new with plans to make positive changes and hold onto Albertsons a little while longer; it's essentially a recession-resistant company. The stock may even rise.
2) Work with Kroger and get serious about SpinCo. Develop a comprehensive plan. 650+ stores, include the rights to current brands and facilities. And not forking over all the debt to ensure it withers instantly.
3) Continue shopping Albertsons around to a company that wouldn't create as many problems.
I don't think Sankaran is who came up with the merger with Kroger... has it been announced he will remain with the merged company?

Cerberus and friends control 75% of the shares of the company. Whatever needs to happen that is in the best interest of Cerberus and friends, will happen. They are the group that controls the company. Albertsons is not a typical publicly traded company in that regard; the common stock shareholders have 25% minority interest in the company and basically no say in typical corporate actions like shareholders in a company typically have.

They really just needed to get rid of the bad divisions and let the rest of it go on publicly traded with different shareholders. Cerberus knows how to monetize bad grocery stores (see Albertsons LLC) for their real estate. So do that, get rid of the bad assets, and keep the good ones. The good assets like NorCal and Jewel would post some of the best financial performance in the industry.
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Re: Kroger to merge with Albertsons?

Post by buckguy »

pseudo3d wrote: December 1st, 2022, 9:13 am
retailfanmitchell019 wrote: November 30th, 2022, 6:31 pm
storewanderer wrote: November 6th, 2022, 7:08 pm What a mess.

The more I think about this merger the less I like it. I think Cerberus needs to sell *good, non-overlapping* divisions to Kroger (basically NorCal and Jewel...) and do whatever with the leftovers. IPO Pacific Northwest into its own company if it is so great and so profitable and package it up as an attractive package for a new market entrant. Maybe roll Intermountain into that Pacific Northwest IPO. Find a foreign buyer out of Mexico for SoCal and Southwest.
Texas, Mid Atlantic, Shaws, Acme, sorry- slice and dice. Denver- fire sale.
I am sure in the slice and dice and fire sale Kroger will pick up some additional non-overlapping stores. After analysis of VibeGuy and some further research I've done I do think Pacific Northwest overlap is going to be the straw that "breaks" this merger from happening. Something tells me if the above is the route that is taken, many parties involved will look back at how the slice and dice and grind up goes, and think "it would have been easier if Kroger had merged the whole company in." Also in the above example Safeway banner is gone from NorCal which would be a problem. It will need to remain in Pacific Northwest to maintain the value of that store group for the later IPO.
I agree with your ideas assuming the merger doesn't go through.

For the NW/Intermountain ACI stores, that new market entrant would be Loblaws. Given if Safeway NorCal were to go into Kroger, those NW/Intermountain Safeway stores would be renamed to the Albertsons nameplate.

SoCal/Southwest: Hypothetically, the buyer from Mexico would probably be Soriana (that or the owner of Sears Mexico). I'd expect everything in that block to be converted over to the Vons nameplate. Otherwise, Loblaws could get those stores too.

Texas: United could also be sold to Kroger. Albertsons Market would be merged back into the Southwest Division.
As for the D/FW stores, those could go to Brookshire's. I expect Randalls to be parted out in both Austin and Houston.

Safeway East: I'd think Publix would buy those. UNFI looks to be expanding again, so some of those Safeways could go into Shoppers Food.

Shaw's/Star Market: Those stores would be parted out to Big Y, ShopRite, and Price Chopper, the latter having stores in the far out Boston suburbs. Market Basket is out of the question as they prefer to build their own stores.

Acme: I expect ShopRite operators to buy those stores. Price Chopper or Big Y could buy the Acme stores in the NYC suburbs.

Denver: I expect the Safeway stores in the Rockies (along with Albertsons/Safeway in WY/SD) to be merged into Intermountain. Safeway stores along the Front Range, from Fort Collins to Pueblo, should be sold to AWG, along with their Denver warehouse. Those would take the Price Chopper name. The ones in eastern CO/western NE should be sold to Hy-Vee for their Dollar Fresh format.
In the event of a total Albertsons failure, which you seem to be speculating, most of that comes off as unrealistic. It would probably be like the end of BI-LO, A&P, and when a competitor is forced to leave a market—a feeding frenzy. Kroger would probably take a good part of the stores across every division, smaller competitors start working off the remains, a lot of stores close. Stuff with Soriana and Loblaws might be a fun thought but it's not realistic.

If we look at the fact that Cerberus just needs to sell the majority of the stock, and not the entire company, it opens up a lot more options on exactly who they could sell it to. Other investment groups and investors would be the most seamless option, obviously. Even if Lone Star Funds bought into Albertsons and merged SEG in, that wouldn't necessarily be a good thing, as it would require Albertsons to babysit Winn-Dixie instead of using funds for its own fixer-upper operations.

With the announcement of the Kroger merger, we know the Ahold Delhaize meeting was real (and obviously fell through). Ahold Delhaize is the only European company that operates mainstream stores in the United States (well, them and the two Aldi companies and Lidl). Maybe a foreign company could buy Albertsons or in part.

Tesco would obviously be a poor choice, given their fiasco with Fresh & Easy and not even being able to handle the F&F account they had with Hy-Vee, and still unable to have demonstrated that they learned their lesson. Maybe Carrefour or Auchan. Like Tesco they once had American options, but they're farther in the past. As long as they don't muck around with the company too much they might even be able to bring fresh ideas to the chain, like larger stores with apparel store-within-a-stores, much like Hy-Vee.
Interesting thoughts--esp. the non-necessity of selling all of Cerberus's interest and the speculations about the Europeans. Carrefour seems more successful than Auchan. Many of their foreign operations are in the former French spheres of influence, but not most. I've been to their stores in the distant past and they seemed well-run. They seem willing to do joint ventures and probably have done good cultural adaptations to survive as long as they have in so many places.
Last edited by buckguy on December 4th, 2022, 3:03 pm, edited 1 time in total.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

storewanderer wrote: December 3rd, 2022, 11:41 pm
pseudo3d wrote: December 2nd, 2022, 10:53 pm

Now that Sankaran has testified that Albertsons' finances are good, it would be difficult to smash the company into pieces immediately "for financial reasons" if the merger falls through lest Sankaran gets accused of perjury. And Cerberus' impatience drove them into this mess...no way they'd allow a slow Lampert-style liquidation while maintaining the pretense that the company could be "restored to profitability" by "reshaping the company" or whatever Lampert's excuse was.

Fortunately for Cerberus they have three real options:

1) Dump Sankaran and install someone new with plans to make positive changes and hold onto Albertsons a little while longer; it's essentially a recession-resistant company. The stock may even rise.
2) Work with Kroger and get serious about SpinCo. Develop a comprehensive plan. 650+ stores, include the rights to current brands and facilities. And not forking over all the debt to ensure it withers instantly.
3) Continue shopping Albertsons around to a company that wouldn't create as many problems.
I don't think Sankaran is who came up with the merger with Kroger... has it been announced he will remain with the merged company?

Cerberus and friends control 75% of the shares of the company. Whatever needs to happen that is in the best interest of Cerberus and friends, will happen. They are the group that controls the company. Albertsons is not a typical publicly traded company in that regard; the common stock shareholders have 25% minority interest in the company and basically no say in typical corporate actions like shareholders in a company typically have.

They really just needed to get rid of the bad divisions and let the rest of it go on publicly traded with different shareholders. Cerberus knows how to monetize bad grocery stores (see Albertsons LLC) for their real estate. So do that, get rid of the bad assets, and keep the good ones. The good assets like NorCal and Jewel would post some of the best financial performance in the industry.
Whether the merger lives or dies, Sankaran will probably get his golden parachute either way...unless of course, he gets thrown under the bus by making the acquisition more of a liability than it already is.

Realistically, Sankaran will probably not be charged with perjury even in the worst case scenario and it just results in a lawsuit against Cerberus.

The problem is that they really don't have bad divisions that can be monetized like they used to, and I have to assume that even the worst divisions are at least pulling in marginal business. When you look at the divisions and markets they got rid of under LLC, they had buyers lined up that did not cause a problem in and of themselves. Ross picked up a number of sites (though I'm not sure if they actually closed them because of Ross or if Ross took some that were closed immediately in the wake of the split). In NorCal, they sold those stores to Save Mart, in Florida, they sold most of their stores to Publix (at a deal they couldn't refuse). In the Dallas-Fort Worth division, they sold stores to H-E-B (2007 with the Austin stores and in 2011 with the other three that weren't closed or sold yet). The "Rocky Mountain Division" (what Albertsons had the Denver stores as) was just absorbed into the other divisions but they still had a presence in the area.

At this point in the non-Dallas stores, they don't have a lot of options for selling. The Houston stores are already being squeezed by H-E-B and Kroger, and the independents market that once flourished is no longer. The Denver market can't easily be dealt with either. They DO have options for "Mid-Atlantic" and Shaw's...but obviously not good ones. The only way they could get rid of the stores in one piece would be some sort of joint partnership with C&S Wholesale Grocers, with C&S supplying the stores and taking over the large ACME facility, throwing in their "Grand Union" stores and whatever other stores they still own, and Albertsons holding a stake in the venture.
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Re: Kroger to merge with Albertsons?

Post by storewanderer »

pseudo3d wrote: December 4th, 2022, 10:45 am

Whether the merger lives or dies, Sankaran will probably get his golden parachute either way...unless of course, he gets thrown under the bus by making the acquisition more of a liability than it already is.

Realistically, Sankaran will probably not be charged with perjury even in the worst case scenario and it just results in a lawsuit against Cerberus.

The problem is that they really don't have bad divisions that can be monetized like they used to, and I have to assume that even the worst divisions are at least pulling in marginal business. When you look at the divisions and markets they got rid of under LLC, they had buyers lined up that did not cause a problem in and of themselves. Ross picked up a number of sites (though I'm not sure if they actually closed them because of Ross or if Ross took some that were closed immediately in the wake of the split). In NorCal, they sold those stores to Save Mart, in Florida, they sold most of their stores to Publix (at a deal they couldn't refuse). In the Dallas-Fort Worth division, they sold stores to H-E-B (2007 with the Austin stores and in 2011 with the other three that weren't closed or sold yet). The "Rocky Mountain Division" (what Albertsons had the Denver stores as) was just absorbed into the other divisions but they still had a presence in the area.

At this point in the non-Dallas stores, they don't have a lot of options for selling. The Houston stores are already being squeezed by H-E-B and Kroger, and the independents market that once flourished is no longer. The Denver market can't easily be dealt with either. They DO have options for "Mid-Atlantic" and Shaw's...but obviously not good ones. The only way they could get rid of the stores in one piece would be some sort of joint partnership with C&S Wholesale Grocers, with C&S supplying the stores and taking over the large ACME facility, throwing in their "Grand Union" stores and whatever other stores they still own, and Albertsons holding a stake in the venture.
At this point the job of Sankaran is to just stay the course. Run the store, until the merger goes through. He isn't going to be the one who somehow makes the merger happen or makes the merger not happen. He is just there to, literally, run the store, until Kroger takes over. Again has it been said yet what position he will assume in the merged company, if any?

They can absolutely monetize any real estate connected to the lowest performing divisions. Cerberus gave some profitable stores to Ross that they would have kept open otherwise, and Save Mart absolutely would have kept open (to this day), but Ross wanted some of the stores so badly that Cerberus agreed to close the stores to get Ross the package they wanted. I think you'd be surprised the feeding fest that would take place if they sold any stores in Texas. There would be many interested parties, some grocery and some non-grocery. In some cases the landlords would love to get the space back so they could split the space into a couple of 30k square foot boxes and make more money on renting to 2 different tenants.
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Re: Kroger to merge with Albertsons?

Post by HCal »

storewanderer wrote: December 4th, 2022, 9:15 pm They can absolutely monetize any real estate connected to the lowest performing divisions. Cerberus gave some profitable stores to Ross that they would have kept open otherwise, and Save Mart absolutely would have kept open (to this day), but Ross wanted some of the stores so badly that Cerberus agreed to close the stores to get Ross the package they wanted. I think you'd be surprised the feeding fest that would take place if they sold any stores in Texas. There would be many interested parties, some grocery and some non-grocery. In some cases the landlords would love to get the space back so they could split the space into a couple of 30k square foot boxes and make more money on renting to 2 different tenants.
I think this is a bit optimistic. When LLC sold those stores to Ross in 2006, the real estate market was strong and there was high demand for retail space. Today, we are headed into a recession, the "retail apocalypse" is still in progress, and experts have predicted the real estate market is headed for a drop. Just look at all the Kmart buildings across the country that are still vacant several years after the stores were closed in the 2010s.

While some of the "good " sites may get snapped up quickly, overall I don't think monetizing the real estate at this stage is a viable strategy.
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Re: Kroger to merge with Albertsons?

Post by storewanderer »

HCal wrote: December 4th, 2022, 9:55 pm
I think this is a bit optimistic. When LLC sold those stores to Ross in 2006, the real estate market was strong and there was high demand for retail space. Today, we are headed into a recession, the "retail apocalypse" is still in progress, and experts have predicted the real estate market is headed for a drop. Just look at all the Kmart buildings across the country that are still vacant several years after the stores were closed in the 2010s.

While some of the "good " sites may get snapped up quickly, overall I don't think monetizing the real estate at this stage is a viable strategy.
The other thing is a number of those buildings LLC sold to Ross were in, difficult to duplicate type of locations (bay area). Is that the case for a Denver Safeway? Not really. Is that the case for a DC/MD Safeway? Sometimes.

Developers are very creative with empty retail boxes that are no longer viable for retail. Conversions to healthcare facilities, building apartments in the parking lots, conversions to indoor storage facilities, recreational facilities, offices, there are many possibilities. There are a lot of opportunities. Look at Comvest/Haggen; they made money in the end through the real estate sales.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

storewanderer wrote: December 4th, 2022, 9:15 pm
pseudo3d wrote: December 4th, 2022, 10:45 am

Whether the merger lives or dies, Sankaran will probably get his golden parachute either way...unless of course, he gets thrown under the bus by making the acquisition more of a liability than it already is.

Realistically, Sankaran will probably not be charged with perjury even in the worst case scenario and it just results in a lawsuit against Cerberus.

The problem is that they really don't have bad divisions that can be monetized like they used to, and I have to assume that even the worst divisions are at least pulling in marginal business. When you look at the divisions and markets they got rid of under LLC, they had buyers lined up that did not cause a problem in and of themselves. Ross picked up a number of sites (though I'm not sure if they actually closed them because of Ross or if Ross took some that were closed immediately in the wake of the split). In NorCal, they sold those stores to Save Mart, in Florida, they sold most of their stores to Publix (at a deal they couldn't refuse). In the Dallas-Fort Worth division, they sold stores to H-E-B (2007 with the Austin stores and in 2011 with the other three that weren't closed or sold yet). The "Rocky Mountain Division" (what Albertsons had the Denver stores as) was just absorbed into the other divisions but they still had a presence in the area.

At this point in the non-Dallas stores, they don't have a lot of options for selling. The Houston stores are already being squeezed by H-E-B and Kroger, and the independents market that once flourished is no longer. The Denver market can't easily be dealt with either. They DO have options for "Mid-Atlantic" and Shaw's...but obviously not good ones. The only way they could get rid of the stores in one piece would be some sort of joint partnership with C&S Wholesale Grocers, with C&S supplying the stores and taking over the large ACME facility, throwing in their "Grand Union" stores and whatever other stores they still own, and Albertsons holding a stake in the venture.
At this point the job of Sankaran is to just stay the course. Run the store, until the merger goes through. He isn't going to be the one who somehow makes the merger happen or makes the merger not happen. He is just there to, literally, run the store, until Kroger takes over. Again has it been said yet what position he will assume in the merged company, if any?

They can absolutely monetize any real estate connected to the lowest performing divisions. Cerberus gave some profitable stores to Ross that they would have kept open otherwise, and Save Mart absolutely would have kept open (to this day), but Ross wanted some of the stores so badly that Cerberus agreed to close the stores to get Ross the package they wanted. I think you'd be surprised the feeding fest that would take place if they sold any stores in Texas. There would be many interested parties, some grocery and some non-grocery. In some cases the landlords would love to get the space back so they could split the space into a couple of 30k square foot boxes and make more money on renting to 2 different tenants.
Ross and Publix both had money lined up to buy what they wanted at perhaps more than it was actually worth. For Publix at least Albertsons LLC got a great deal, and I think if Albertsons Cos. got a deal like that they'd take it in an instant. I don't think there's any more cases where a landlord wants Albertsons (or whatever) out of the way for new tenants. Yeah, get Albertsons out of the way for...a Dollar Tree and a trampoline park and a Goodwill or whatever....and enough 20k-30k square feet boxes have gone vacant in recent years (Stage Stores bankruptcy in particular, which had lots of Texas and Louisiana stores) that would make a deal especially enticing.

Compounding that is that a significant portion of real estate in the company has already been converted to leases.
storewanderer wrote: December 4th, 2022, 10:24 pm The other thing is a number of those buildings LLC sold to Ross were in, difficult to duplicate type of locations (bay area). Is that the case for a Denver Safeway? Not really. Is that the case for a DC/MD Safeway? Sometimes.

Developers are very creative with empty retail boxes that are no longer viable for retail. Conversions to healthcare facilities, building apartments in the parking lots, conversions to indoor storage facilities, recreational facilities, offices, there are many possibilities. There are a lot of opportunities. Look at Comvest/Haggen; they made money in the end through the real estate sales.
I've seen some of that in areas that are no longer viable for retail altogether. At least one Albertsons in Houston was like that, closed after just a few years (was not sold to another grocer) and ended up becoming a big self-storage unit. It was an abysmal location. But again, no one is going to be lining up to buy out a functioning (if marginal) grocery store to redevelop into a non-retail facility. OK, there could be. But they aren't going to be buying in bulk like Ross, Publix, Save Mart, or H-E-B.
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Re: Kroger to merge with Albertsons?

Post by Romr123 »

Carrefour miiiiight be interested, but there's an awful gap between any but the Fred Meyer stores and Carrefour's normal hypermarket offering. There's always been subtle talk in Michigan that when the Meijer family wants out it would make a nice sized acquisition for Carrefour with lots of cross-fertilization opportunity.

As supply chains have globalized, it's little extra effort to divert a couple thousand units of, say an egg cooker (multipot, microwave, table cloth, etc) spec'd and branded for Carrefour to the US to supply a Meijefour/Carreijer mash-up.
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Re: Kroger to merge with Albertsons?

Post by pseudo3d »

Romr123 wrote: December 5th, 2022, 7:01 am Carrefour miiiiight be interested, but there's an awful gap between any but the Fred Meyer stores and Carrefour's normal hypermarket offering. There's always been subtle talk in Michigan that when the Meijer family wants out it would make a nice sized acquisition for Carrefour with lots of cross-fertilization opportunity.

As supply chains have globalized, it's little extra effort to divert a couple thousand units of, say an egg cooker (multipot, microwave, table cloth, etc) spec'd and branded for Carrefour to the US to supply a Meijefour/Carreijer mash-up.
A Carrefour purchase would not necessarily mean they'd operate hypermarkets in the US, as all these companies operate regular supermarkets as well.
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Re: Kroger to merge with Albertsons?

Post by ClownLoach »

pseudo3d wrote: December 5th, 2022, 7:10 am
Romr123 wrote: December 5th, 2022, 7:01 am Carrefour miiiiight be interested, but there's an awful gap between any but the Fred Meyer stores and Carrefour's normal hypermarket offering. There's always been subtle talk in Michigan that when the Meijer family wants out it would make a nice sized acquisition for Carrefour with lots of cross-fertilization opportunity.

As supply chains have globalized, it's little extra effort to divert a couple thousand units of, say an egg cooker (multipot, microwave, table cloth, etc) spec'd and branded for Carrefour to the US to supply a Meijefour/Carreijer mash-up.
A Carrefour purchase would not necessarily mean they'd operate hypermarkets in the US, as all these companies operate regular supermarkets as well.
Carrefour was a developer of the largest mall in Quebec, Carrefour Laval which is still considered to be a extreme top performer worldwide in malls (such as Ala Moana, South Coast Plaza, etc) and untouched by the decline of indoor malls in general. But Carrefour sold out 20 years ago. Not sure if they still have any other North American holdings.
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