In all of this, Save Mart has set up a management team with long-time Albertsons people who know how to properly run supermarkets. Save Mart is almost certainly going to be the "SpinCo". There likely will be no "SpinCo".ClownLoach wrote: ↑March 15th, 2023, 11:25 am
They're going to follow the 7-Eleven Speedway model to the T, except for closing Pre approval.
Basically they are going to start by putting selected locations on the block and selling them to competitors either a store at a time (in surgical markets like SoCal where overlap is a mess) or in an entire group (like the more problematic Nevada and Arizona where a KR store is seemingly always on the other corner from an ACI store). This will be the wave 1 of divests and it is likely imminent that the "for sale" list gets posted of selected ACI and KR stores. The list was made cooperatively as previously disclosed - it isn't collusion if you announce it and the government doesn't immediately say no.
The divestitures are just straightforward sales to competitors. The SpinCo idea was BS from the start and they never intended to actually go through with it unless they were forced to - which of course by design the SpinCo would quickly degenerate into a group of zombie stores since they are not willing to part with any non-retail assets (warehouses, manufacturing plants, etc.). I'm betting that the rampant speculation on banners like Albertsons itself here is misguided too. They won't let any banner go unless they have a convenient need to sell it entirely (QFC although they'll surgically pick and choose what sells vs converts to Safeway, discount banners Rvler FoodsCo and Food4Less). Aside from QFC which could go anywhere I suspect that the SpinCo proposal would primarily be the discount brands and have a stated intent to convert other stores lumped in to one of those formats. They get to claim they've created an "agile new competitor focused on driving down food prices in the community" and who could say no to that?
As far as divesting without FTC approval? That's exactly what they've indicated they would do from day one, at least to start the process. And everyone is probably better off with the companies doing this vs. the FTC or state AGs because they love to point out problems like the Haggen debacle... But they are just as responsible for that failure as ACI.
So it's going to go down like this.
Divest Wave 1: sale to competitors self selected obvious overlaps (even fixing some overlaps that survived the ACI merger like Vons across the street from Albertsons). Groups like ACI southwest coupled with surgically selected in SoCal and PNW. They'll mainly be less desirable stores coupled with bad landlord relationship stores threatened with redevelopment. These are stores that if there was no opposition at all to the merger they'd just close them right away unless the rent was cheap. Intent is to get rid of what they would anyway at a profit and move to localized discussions with AGs etc. on any other situation they find undesirable.
Divest Wave 2: these will be additional stores added to the sale to competitor list which are selected through negotiations with a state AG or other governmental agency. These probably will be "better" stores which they would rather keep but they are willing to let them go in an effort to make the deal happen.
Divest Wave 3 (Possible SpinCo): this will be any store they couldn't find a buyer for in Wave 1 and Wave 2. They will throw the discount brands in here as a token as well. I would expect to see anything in this bucket rebranded to the discount banner and format at KR/ACI expense. This group will be sold either entirely as one transaction to one buyer, or it will become SpinCo the "agile new competitor" with a price impact format so they can claim they're working to drive down prices. They will not include any facilities with this either, but if it becomes a spin they may be forced to source and sign up long term deals with other suppliers before the deal is done (Unified or whoever, honestly I'm not familiar with all of them). With appropriate long term contracts they should have a positive balance sheet as promised. Kroger may be forced to financially backstop this chain against failure for ten years unless it is acquired or "negligently managed" . In reality they're just creating a new competitor to the growing threat of Winco and giving it to ACI shareholders in exchange for their vote on the final merger deal.
Kroger is going to have to offload entire banners (likely Albertsons) to make this deal happen. The crazy people in Cincinnati can throw fits about this, especially if they proceed to slap a Kroger sign on every store except for HT two days after the deal closes. They can't just load SpinCo with random stores from random banners, and have them use Kroger brands. SpinCo would then just be a puppet subsidiary of Kroger in that regard, and would ultimately kill the merger.
I expect Save Mart to be a temporary vehicle for all Albertsons banner stores (regardless of whether or not they compete with a Kroger) until Ahold likely scoops them up and becomes owner of the Albertsons banner. Save Mart could be taking Signature brands and quit their Topco contract.
Save Mart would keep Albertsons stores as Albertsons- there will be no conversions to discount formats with a lower pay structure- that would throw another wrench into the deal.
The FTC may have finally learned a steep lesson from the Haggen flameout. They didn't learn after the Smith's failures in MT/WY, the Raley's failures in Las Vegas, the Ralphs failures in NorCal, but they have learned after Haggen, as those aforementioned failures were small potatoes compared to Haggen. They are going to view this merger as a merger between two of the largest unionized supermarket chains.
This is how I think Albertsons will be carved up assuming the Kroger merger fails:
Texas: United goes to an investment firm. 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: UNFI looks to be expanding again, so some of those Safeways could go into Shoppers Food. Otherwise, Kroger could buy some of those to put into Harris Teeter.
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: Price Chopper, Big Y, or ShopRite operators could buy Acme stores piecemeal.
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, which could be used form an AWG "western region", which would supply AWG members already in CO/WY/western SD/western NE/western KS. Those Safeway stores would take the Price Chopper name. The Safeway stores in eastern CO/western NE should be sold to Hy-Vee for their Dollar Fresh format.
The core parts of Albertsons (NorCal, PNW, Intermountain, Southwest, SoCal, Jewel) would be sold to Ahold.