SpinCo

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pseudo3d
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Re: SpinCo

Post by pseudo3d »

storewanderer wrote: December 30th, 2022, 11:58 pm
jamcool wrote: December 30th, 2022, 11:39 pm The Albertsons name
Putting Albertsons on all of the stores is going back to the Lucky rebrand situation. Albertsons only has stores in Phoenix and Tucson, everything else is the 100 year old Safeway banner (Albertsons entered the AZ market in 1990)
Main difference here is Albertsons did not have to rebrand those Lucky Stores to Albertsons. That was a pure ego move by Gary Michael the old CEO who wanted Albertsons to be a nationwide grocery brand. Albertsons had a choice and could have continued the popular Lucky name and format in CA; they did not and went with the marginal Albertsons brand which had always been a 4th tier player in California at best.

The longer things goes on and one thing after another (most recently this Express Scripts acceptance ending at Kroger owned pharmacies) I am becoming more and more convinced this merger is not going to happen.

But maybe it will happen...

With this SpinCo thing while we do not know the exact arrangement yet the general thought is some stores will have to be rebranded just due to the logistics of the situation. It is possible keeping the store banners is an option, but the point comes where it may not be possible and a rebrand may be mandatory. That is the scenario of putting the name Albertsons, Vons, or whatever, on all SpinCo Stores, comes in as a possible thing. Would rebranding a store in AZ that has been a Safeway for 60 years to Albertsons or Vons be something you'd do if you didn't have to? Absolutely not.

I am still suspicious Kroger is going to take this opportunity to rebrand everything to Kroger. Kroger has not confirmed what banners they want to use going forward. In that case SpinCo just may get to use all of these names however they want.

Realistically if Safeway was a better banner in all markets I'd almost propose Kroger banner like this but the problem is Safeway is such a second tier banner in so many markets compared to Kroger's existing banners:
Basically all non "Kroger" banner markets out west and including Kansas/Colorado/Nebraska- Safeway banner
Existing "Kroger" banner markets (including Jewel, Texas)- Kroger banner
The wild card in this is what do you do with the stuff back east... and Harris Teeter... probably just Kroger banner the whole thing.
While a full Kroger rebrand may be in the cards, I don't think they'd want to give up the Albertsons brand to SpinCo, or any other brand for that matter.

In terms of Albertsons as a national brand, I think it's been well established it wasn't so much the Albertsons name on Lucky, it was the radical re-merchandising, staffing, and pricing changes that came with it.
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Re: SpinCo

Post by storewanderer »

pseudo3d wrote: December 31st, 2022, 11:12 am

While a full Kroger rebrand may be in the cards, I don't think they'd want to give up the Albertsons brand to SpinCo, or any other brand for that matter.

In terms of Albertsons as a national brand, I think it's been well established it wasn't so much the Albertsons name on Lucky, it was the radical re-merchandising, staffing, and pricing changes that came with it.
Kroger is making so little effort with most of these banners, even banners they've improved and built a positive reputation for, anymore that I am just not sure how much they will care about the Albertsons/Safeway banners which are basically all banners that have been dragged through a lot of mud with very mixed reputations over the years. I do think these are still valuable brands despite everything though. Consumers don't even all know these brands are under some common ownership. I was just over there in Google on reviews of that Troutdale Albertsons - one star review from someone saying he won't shop there anymore since it is turning into a Safeway because he hates Safeway. Man, you've been shopping already in a store that is a Safeway but has a sign out front that says Albertsons getting the same exact items/prices you would have gotten at a Safeway... but okay.

I agree it is more about the quality of the store than the sign in front of the store. Banner changes could be implemented properly. Do I think Kroger could implement a banner change properly? On the stores that Kroger has owned for 20 years and slotted private label in for over 20 years (Smiths, Frys, Fred Meyer, Ralphs, Dillons, King Soopers), sure, nothing would change in these stores if they put a Kroger sign up other than the sign. But if they were to suddenly take these Safeway/Albertsons units, and convert them to Kroger overnight, roll in Kroger programs immediately, the results would not be good.
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Re: SpinCo

Post by storewanderer »

It seems Albertsons has shifted an executive to deal with Spinco.

https://www.winsightgrocerybusiness.com ... ger-kroger

This is one of those old long time Albertsons people. Very strong operator who they've had all over the country over the years, plus some time at Ahold in the middle. Very similar experience to multiple of the current executives at Save Mart.

My guess is what is happening here is when they put the calculation for store prices if stores are transferred to SpinCo, they basically established a "floor" value for store transfers. So there don't have to be any fire sales of profitable stores because they can just put those stores into SpinCo and get the proceeds per the formula in the merger agreement vs. fire sales of profitable stores.

Recall the Albertsons shareholders are getting stock/shares in SpinCo as part of their compensation for the merger; the value allocation will depend how many stores go into SpinCo/what price those stores sell for.

Also would it potentially be better for Albertsons to put everything they plan to divest into SpinCo (again using that formula in the merger agreement to compute cost per store) then let SpinCo do the selling to other parties?

I'm trying to figure out how or if SpinCo and Save Mart will interact. Like, will Save Mart end up merging itself into the publicly traded SpinCo? Would that happen immediately or later? Or could it be the opposite where Save Mart's investment group buys SpinCo after it is publicly traded and takes it private?

I question how well SpinCo's stock will do, even with strong operators, it just seems like a very tough thing.
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Re: SpinCo

Post by retailfanmitchell019 »

storewanderer wrote: May 20th, 2023, 8:41 pm It seems Albertsons has shifted an executive to deal with Spinco.

https://www.winsightgrocerybusiness.com ... ger-kroger


Recall the Albertsons shareholders are getting stock/shares in SpinCo as part of their compensation for the merger; the value allocation will depend how many stores go into SpinCo/what price those stores sell for.

Also would it potentially be better for Albertsons to put everything they plan to divest into SpinCo (again using that formula in the merger agreement to compute cost per store) then let SpinCo do the selling to other parties?

I'm trying to figure out how or if SpinCo and Save Mart will interact. Like, will Save Mart end up merging itself into the publicly traded SpinCo? Would that happen immediately or later? Or could it be the opposite where Save Mart's investment group buys SpinCo after it is publicly traded and takes it private?

I question how well SpinCo's stock will do, even with strong operators, it just seems like a very tough thing.
I think this is how SpinCo will go down:
SpinCo will detach from ACI similar to how Albertsons LLC formed from Old Albertsons. Albertsons LLC was technically formed to be the second incarnation of Albertsons. Old Albertsons, after the rest of Albertsons was sold to SuperValu and CVS, converted to an LLC in June 2006, when the breakup completed. This time, I expect SpinCo will be formed as the third incarnation of Albertsons (fourth for the SVU Albertsons stores). ACI will convert into whatever SpinCo will be called (Albertsons Group)?
I still think the Albertsons banner will be used as a property for SpinCo to use on its stores, including core divested stores (all Albertsons brand stores left, divested Vons stores, divested Safeway stores in Southwest and Intermountain divsions, and QFC). I don't think they will keep Safeway stores in the Denver (save for mountain stores, WY, SD) or East divisions, and divested stores in TX/AR/LA (save for El Paso, in SW division). SpinCo will dump those off, and possibly F4L/Foods Co (converting the better locations to Albertsons). I think SpinCo will take manufacturing, store brands and distribution centers from the current Albertsons.
A wild card is, will Rvler Foods go into SpinCo? I'd sell those stores should be sold to Save-A-Lot operators. I know it is really Ruler Foods, but the logo looks awkward enough.

I'd expect F4L/Foods Co. to be kept assuming Save Mart is involved. SpinCo/Save Mart does the divest work for Ahold (when the SpinCo/Ahold and possibly Save-On-Foods merger inevitably happens). Bob Miller is on the Jim Pattison board of directors.
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Re: SpinCo

Post by storewanderer »

The dots seem to keep connecting between divested stores, Save Mart, and SpinCo. At least from a people perspective.

Unless something changes economically I don't see how Pattison can make a deal work at the present time due to the US Dollar situation.

I am suspicious the high interest rates may be part of why the SpinCo topic is coming back into play also. Potential buyers would have to borrow at such high rates right now, it is tough to make a deal work. Also my view is some of the regional chains that would be potential buyers are really struggling right now due to the inflation, price increases, and significant customer losses occurring basically every week at this point to cheaper stores.

I went into WinCo this morning in South Reno at 8:30 AM and could not believe how busy it was in there. There were probably 200 customers shopping. Upper middle class customers in the 50-60 age group driving off in expensive SUVs made up the majority of the customers. To be fair Smiths nearby was also somewhat busy but not this busy. Sprouts was largely deserted and Safeway had a handfull of customers.
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Re: SpinCo

Post by HCal »

The fact that Albertsons is planning this on their side seems to indicate that no Kroger-owned stores will go into Spinco. Either all the divests will be from the Albertsons side, or Kroger divests will go straight to other operators.

If Spinco isn't immediately bought by someone, I'm not sure how long it can survive. There are very few publicly traded supermarket chains these days, and a chain of that size, with stores scattered in different markets, and no manufacturing or distribution infrastructure, is going to be of questionable viability. But if it's immediately sold, then I don't see the point of creating it in the first place.
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Re: SpinCo

Post by ClownLoach »

First off, they're clearly saying that they've assigned all of ONE executive to this initiative with the clear caveat of "IF NEEDED." They have to be prepared for every contingency so of course they would assign someone.

But the rest of the article makes it clear that they're still working the path of selling stores to bidders. And I am not sure why everyone is concerned about interest rates when Private Equity vultures will provide free* money (*in exchange for ownership interest). Most merger deals are funded by those kinds of people and not banks who have to charge more. PE can charge whatever they want for interest. Remember Apollo is involved and they are assuredly lined up to back any needed funding; that's why they bought into ACI in the first place with an interest of trying to increase value through transactional deals.

They can't get around the pricing/value of the stores through manipulative ways either. They can't spin it off and claim it's a new $5B enterprise so acquisition cost for Kroger drops $5B if the Financials don't support the value. It doesn't work that way. If the stores spun off have a similar financial situation as the current chain then they'll have to spin with the same price/earnings valuation as the rest of the chain. It is almost assured that Spinco stores would be worse performers and as such the valuation will be required to be lower. If that did not happen then there would be a shareholder rights lawsuit almost instantly.

There is no benefit to creating Spinco unless there is absolutely no available buyer for the stores. There will not be a creation of Spinco with immediate subsequent acquisition by someone else due to the costs of such a deal; they would just buy what they want before Spinco occurred. And since they're not going to sell or spin any facilities to support these stores they're dead in the water as a standalone company forced to immediately contract with someone to supply them.
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Re: SpinCo

Post by ClownLoach »

ClownLoach wrote: May 21st, 2023, 10:56 am First off, they're clearly saying that they've assigned all of ONE executive to this initiative with the clear caveat of "IF NEEDED." They have to be prepared for every contingency so of course they would assign someone.

But the rest of the article makes it clear that they're still working the path of selling stores to bidders. And I am not sure why everyone is concerned about interest rates when Private Equity vultures will provide free* money (*in exchange for ownership interest). Most merger deals are funded by those kinds of people and not banks who have to charge more. PE can charge whatever they want for interest. Remember Apollo is involved and they are assuredly lined up to back any needed funding; that's why they bought into ACI in the first place with an interest of trying to increase value through transactional deals.

They can't get around the pricing/value of the stores through manipulative ways either. They can't spin it off and claim it's a new $5B enterprise so acquisition cost for Kroger drops $5B if the Financials don't support the value. It doesn't work that way. If the stores spun off have a similar financial situation as the current chain then they'll have to spin with the same price/earnings valuation as the rest of the chain. It is almost assured that Spinco stores would be worse performers and as such the valuation will be required to be lower. If that did not happen then there would be a shareholder rights lawsuit almost instantly.

There is no benefit to creating Spinco unless there is absolutely no available buyer for the stores. There will not be a creation of Spinco with immediate subsequent acquisition by someone else due to the costs of such a deal; they would just buy what they want before Spinco occurred. And since they're not going to sell or spin any facilities to support these stores they're dead in the water as a standalone company forced to immediately contract with someone to supply them.
I should also mention the longer history of the American Stores deal and how it went down. There's no guarantees that ACI could create Spinco only for the feds to order more divestitures outside of it which again get sold at fire sale prices. The fact is that buyers know that they're more likely to get a good deal the longer they wait, and as such Spinco isn't an adequate option for establishing a floor price either. It's really just a dumb option that shouldn't have ever been taken seriously.
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Re: SpinCo

Post by ClownLoach »

storewanderer wrote: May 20th, 2023, 9:42 pm I went into WinCo this morning in South Reno at 8:30 AM and could not believe how busy it was in there. There were probably 200 customers shopping. Upper middle class customers in the 50-60 age group driving off in expensive SUVs made up the majority of the customers. To be fair Smiths nearby was also somewhat busy but not this busy. Sprouts was largely deserted and Safeway had a handfull of customers.
Seeing the same in Temecula. Winco parking lot jammed with BMW, Mercedes, and Lexus cars. The fact that Trader Joe's is behind the store brings even more traffic. Meanwhile the Albertsons-on-every-corner are pretty slow. I have noticed Albertsons is relaunching their big Friday deals and had some real bargains like the large premium frozen pizzas for $3 without digital coupon gimmicks.
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Re: SpinCo

Post by ClownLoach »

storewanderer wrote: May 20th, 2023, 9:42 pm The dots seem to keep connecting between divested stores, Save Mart, and SpinCo. At least from a people perspective.

Unless something changes economically I don't see how Pattison can make a deal work at the present time due to the US Dollar situation.
There is some real confusion here. There are definitely links to divests going to Save Mart, Ahold, and others. But that means they're not going to do a Spinco. Anything being bought means no Spinco.

Nothing that goes to a Spinco is then being subsequently sold. It makes absolutely no sense. Why would a buyer choose to acquire the stores effectively absorbing the costs of two sales (first to Spinco then Spinco to themselves)? Why pay more? If Spinco happens it sits out there for a while alone and the only place it goes to is possibly a PE buyer like Apollo or Cerberus. Since both seem to be trying to get out of the market I doubt they'd turn around and rebuy a sizable chunk of the company comprised of their weakest links while requiring the creation of a supply chain and corporate headquarters.

Spinco is literally the absolute last resort option intended to contain every single required divestiture, not just some, in the unlikely event they can't get a better deal selling the stores individually or in groups. With the extra caveat that a small Spinco of just a fraction of the divests wouldn't be profitable at all and would immediately sink, the regulators would easily figure that out and torpedo the entire deal. The only way such an organization would survive is if they had guaranteed credit lines and supplier contracts cemented prior to a spinoff and (this is key) they contained every single divestiture period. And it would contain ACI stores as well as KR, they would just acquire the necessary KR stores at the merger close. For Spinco to have any chance of survival it would need to be as large as possible and contain the very best of the divestitures so that there are enough units providing adequate cash return.

The reality is that they can only use Spinco as a threat against potential buyers to limited effect, basically saying give us the best deal for these stores or we could just jettison them to our shareholders, but even then they are at a disadvantage because the valuation of "good stores" to buyers will likely exceed the value of Spinco. So then whatever isn't a "good store" will still be a tough sale as buyers wait for a fire sale and potentially get units for as little as $1.
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