SpinCo

[arizonaguy]

I think there is the potential for 2 things to happen here.

1.) SpinCo: This is almost assuredly going to be a chain of 100 - 375 stores and if I were to bet money all of the stores would be branded as Albertsons if this was going to be an ongoing operation. If not, I'd agree that it could have the regional nameplates (a la Rite Aid) until the stores are either closed or divested to other parties.

2.) As far as the banners / stores in the SW Division.

Las Vegas:

I'd expect the VONS banner to go away in this region (and potentially most VONS stores to either close or be spun off to SpinCo).

Depending on what happens with the Albertsons banner I'd expect most Albertsons stores not in close proximity to Smith's stores to remain open. Albertsons stores close to Smith's stores may be closed and/or spun off to SpinCo depending on performance.

I doubt Kroger will keep multiple banners here so I'd expect everything to be branded as either Smith's (or Kroger if they rebrand everything to Kroger).

Phoenix / Tucson:

Albertsons: I'd expect the Albertsons banner to go away in this region unless SpinCo uses it for their stores. Most Albertsons stores that aren't adjacent to a Fry's store I'd imagine would be kept. There are some good stores in this batch not close to a Fry's such as Via Linda / Frank Lloyd Wright, Hayden / Indian Bend, Tatum / Deer Valley. Other higher preforming stores that are close to Fry's would be spun off into SpinCo such as Carefree / North Valley Parkway. The kicker for the Albertsons banner is that it is non-union so there's a chance all 30 Albertsons stores in Arizona could end up spun off.

Safeway: Safeway has a nice store fleet in Arizona. They've got some new stores and have pretty much renovated most of their existing stores. While I have no doubt some Safeway stores near Fry's stores may be divested, I'm not sure that it will be a sizeable number. There are a number of old, outdated former 1960s / 1970s era Smitty's stores that Kroger operates as Fry's where the shopping centers could be redeveloped into apartments (and probably net Kroger a decent profit on the sale). The Safeway stores in these areas could become Fry's stores and absorb the traffic of the closed Fry's stores. There are probably about 20 - 30 Safeway stores in close proximity to Fry's stores that would be SpinCo candidates, however when Kroger bought Fred Meyer in 1998 they kept a number of Smith's and Smitty's stores that were in close proximity to Fry's stores open and several of the duplicative stores didn't close until either the lease expired or they were able to find another tenant for the stores. To this day Fry's has 2 stores in Scottsdale 1/2 a mile from one another. Safeway also has a number of stores in good locations in places where Fry's isn't particularly strong (such as Scottsdale, Central Phoenix and parts of Tucson) that would be a plus for Fry's.

Currently Albertsons, Safeway and Fry's have about 260 stores in Arizona combined and I'd imagine that Fry's would keep about 200 - 220 of them once all is said and done.

I also wouldn't be surprised to see some of the dumpy old Fry's stores go to SpinCo. Fry's has a number of nice, new stores but has an equal number of stores that are dumpier than any other chain in Arizona. I think they've kept them open because they are profitable with minimal investment doing the volumes Fry's does but if they're near a Safeway store the odds are great that the Safeway is a far nicer store in far better condition.

[marshd1000]

I can’t help to think that there would be a mechanism to put some of the Kroger assets into Spinco post merger? Anyway, while initially there will be close to 400 stores in Spinco, I expect some of them, including the possibility of whole divisions being sold off! Albertsons LLC did that in selling stores to Save Mart! I also don’t see Fred Meyer put into Spinco. Fred Meyer, even with the current Kroger tinkering, is a great concept! It serves as the buyers of general merchandise for Smith, Fry’s, King Soopers, Dillon’s and Kroger Marketplace stores. It is what those stores are modeled after! Anyway, From my vantage point in the Pacific Northwest I see a mess and some opportunities! Starting with Seattle and Western Washington, I can’t see all the Fred Meyer, Safeway, Albertsons, Haggen and QFC stores staying with Kroger! Any remaining Albertsons will be put into Spinco, possibly sold later or at least rebranded (under Spinco or continued Kroger ownership). While the current combined QFC/Fred Meyer market share gives Kroger a #1 position in greater Seattle, QFC penetration is way less outside of King and Snohomish Counties. For this reason, I see Kroger continuing in Western Washington with Safeway and Fred Meyer. I can see the whole QFC division going to Spinco. This could make an attractive acquisition for the Jim Pattinson Group to add to Roth’s and Chuck’s Produce presence west of the Cascades! Or URM could make it a sister banner to Rosauer’s! PortlandVancouver and Western Oregon could also end up having a few Safeways going to Spinco. Again Pattison or URM or both could take them over if they ended up in Spinco. I see the same in Spokane. I think surviving Safeways that stay in Kroger could keep the Safeway banner or even have a dual food ad with Fred Meyer. Since Bellingham is so small, I can’t see Kroger keeping Haggen. I totally see this going to Spinco. Possibly if QFC is put into Spinco, they could keep their name but be managed together with QFC. I could see Haggen rebannering to QFC closer to Seattle. It would make sense for Pattison to acquire Haggen as it would be immediately south of Save-On Foods territory in BC. Boise, the home of Albertsons. Albertsons as a banner won’t go away here. But I could see some individual stores going to Spinco. But under Kroger ownership, as a nod to the connection that Albertsons has to that region, I could see the Boise area Fred Meyer stores rebannered as Albertsons Marketplace stores or to avoid confusion with Albertsons Market Street, maybe it could be Albertsons Plus or Albertsons Supercenter? Alaska is another duplicate market are for both Albertsons and Kroger. Albertsons operates as Carr’s/Safeway in the Anchorage area. Otherwise it’s Safeway. Also under the Eagle stores banner in Nome it is Hanson’s and Crow Creek Mercantile in Girdwood. Fred Meyer is extremely popular in Alaska. It is possible that all of the Alaska portion of the Seattle division could end up in Spinco. But it is possible that only the Safeways in Fairbanks and Juneau and Carr’s in Anchorage could end up in Spinco. I could see Kroger keeping Safeway outside the areas where there are Fred Meyer. if the Anchorage, Juneau, and Fairbanks Safeway and Carr’s stores are put into Spinco, they could all just be rebannered as Carr’s. Of Spinco assets are sold, I could see any Alaska stores going to Northern Commercial Company, as they already know Alaska! We will see if I am right on any or this or way off!

[Bagels]

I’d be surprised if SpinCo retained the Albertsons name. Albertsons has strong brand value in its heritage markets — undoubtedly, the name will be reduced from several hundred stores to a few dozen, but it’s probable it’ll retained.

Most likely, Albertsons stores will keep their banners in markets where Kroger does not compete, and be consolidated into the regional Kroger banners in the markets where they do compete (there could also be a handful of Kroger stores, mostly Smith bannered and, that are folded into the Albertsons and Safeway names). The only exception I would think would be Mariano’s, which may keep its name to distinguish its more upscale self. Kroger could also do something extreme, and rebrand AZ/Las Vegas as Kroger (but I don’t expect this).

I’ll bet the Vons, Pavilions, Haggen and Texas banners will go dormant. I wouldn’t be surprised to see the divestures to use these banners but I somewhat expect Kroger to go with an unfamiliar name - even Lucky - to give it a competitive advantage.

[Bagels]

I can’t help to think that there would be a mechanism to put some of the Kroger assets into Spinco post merger? Anyway, while initially there will be close to 400 stores in Spinco, I expect some of them, including the possibility of whole divisions being sold off! Albertsons LLC did that in selling stores to Save Mart! I also don’t see Fred Meyer put into Spinco. Fred Meyer, even with the current Kroger tinkering, is a great concept! It serves as the buyers of general merchandise for Smith, Fry’s, King Soopers, Dillon’s and Kroger Marketplace stores. It is what those stores are modeled after! Anyway, From my vantage point in the Pacific Northwest I see a mess and some opportunities! Starting with Seattle and Western Washington, I can’t see all the Fred Meyer, Safeway, Albertsons, Haggen and QFC stores staying with Kroger! Any remaining Albertsons will be put into Spinco, possibly sold later or at least rebranded (under Spinco or continued Kroger ownership). While the current combined QFC/Fred Meyer market share gives Kroger a #1 position in greater Seattle, QFC penetration is way less outside of King and Snohomish Counties. For this reason, I see Kroger continuing in Western Washington with Safeway and Fred Meyer. I can see the whole QFC division going to Spinco. This could make an attractive acquisition for the Jim Pattinson Group to add to Roth’s and Chuck’s Produce presence west of the Cascades! Or URM could make it a sister banner to Rosauer’s! PortlandVancouver and Western Oregon could also end up having a few Safeways going to Spinco. Again Pattison or URM or both could take them over if they ended up in Spinco. I see the same in Spokane. I think surviving Safeways that stay in Kroger could keep the Safeway banner or even have a dual food ad with Fred Meyer. Since Bellingham is so small, I can’t see Kroger keeping Haggen. I totally see this going to Spinco. Possibly if QFC is put into Spinco, they could keep their name but be managed together with QFC. I could see Haggen rebannering to QFC closer to Seattle.

Again, Kroger is not looking to divest entire banners into Spinco - it’s clear they’d like SpinCo to be comprised of a mixture of Albertsons/ Kroger stores (in other words, they get to cherry pick the stores they keep, although regulators will force their hand).

Spinco will ultimately receive either a brand new name, or take on a banner Kroger plans to retire - eg Vons (provable). It’s not going to take on a flagship banner.

[arizonaguy]

Again, Kroger is not looking to divest entire banners into Spinco - it’s clear they’d like SpinCo to be comprised of a mixture of Albertsons/ Kroger stores (in other words, they get to cherry pick the stores they keep, although regulators will force their hand).

Spinco will ultimately receive either a brand new name, or take on a banner Kroger plans to retire - eg Vons (provable). It’s not going to take on a flagship banner.

That's the big question though. Is SpinCo going to simply consist of divested Albertsons assets or are Kroger assets going to be transferred into SpinCo.

I think we all can see that out west there are some Kroger assets that would make sense for SpinCo. There are also Albertsons assets in some of these same regions that would also make sense for SpinCo.

[pseudo3d]

Most of what Kroger would consider "spin-off stores" are going to be the smaller, less profitable Albertsons stores in the overlap markets. This is why I think that trading store brands would be the better alternative. So here's a potential "new" SpinCo...SpinCo gets to keep Smith's, Fry's, King Soopers, and Ralphs as brands. They keep ALL of Las Vegas, ALL of Phoenix, ALL of Denver, and ALL of Utah. They also get Mariano's, Harris Teeter, and United. Kroger keeps Albertsons, NorCal, Oregon, Washington, Intermountain, Jewel-Osco, all of the rest of Texas, all of the Mid-Atlantic Division, and the Safeway name. SoCal is shared. It will give Kroger most of what it wants (Jewel-Osco, NorCal, the Northeast) WHILE still leaving SpinCo as a strong regional grocer. It will also prevent Fry's, Smith's, et. al. from getting "Kroger-ized" if they decide to move with the name. It will also leave that area "open" if Kroger ever comes back and wants to buy SpinCo to complete the set.

Maybe I'm misinterpreting but I don't see any scenario where Kroger completely exits Phoenix or Denver. Kroger isn't really building new stores elsewhere and there are several new stores in the pipeline for Phoenix (one other was just announced yesterday). With the Albertsons assets Kroger would have a 44% market share in Phoenix and the only traditional competitor is a Raleys owned Bashas' chain that is barely limping by. Walmart, and a bunch of specialty chains.

Denver doesn't even have another traditional grocer.

What I can see is SpinCo absorbing most if not all of the Albertsons / Safeway stores in Phoenix and Denver but I see NO scenerio where Kroger spins off its own Fry's or King Soopers stores. Those 2 chains are cash cows that Kroger has (and is continuing to) invest a lot in.

Oh of course it won't happen. If Kroger was playing the long game, a larger, viable SpinCo (along with some of the debt) would take a lot of pressure off of the merged company.

[Bagels]

Again, Kroger is not looking to divest entire banners into Spinco - it’s clear they’d like SpinCo to be comprised of a mixture of Albertsons/ Kroger stores (in other words, they get to cherry pick the stores they keep, although regulators will force their hand).

Spinco will ultimately receive either a brand new name, or take on a banner Kroger plans to retire - eg Vons (provable). It’s not going to take on a flagship banner.

That's the big question though. Is SpinCo going to simply consist of divested Albertsons assets or are Kroger assets going to be transferred into SpinCo.

I think we all can see that out west there are some Kroger assets that would make sense for SpinCo. There are also Albertsons assets in some of these same regions that would also make sense for SpinCo.

Upon second read, it’s saying SpinCo will be spun off by Albertsons before the merger closes, so it may be just Albertsons assets, unless Kroger “sells” assets to the company as well.

[storewanderer]

Again, Kroger is not looking to divest entire banners into Spinco - it’s clear they’d like SpinCo to be comprised of a mixture of Albertsons/ Kroger stores (in other words, they get to cherry pick the stores they keep, although regulators will force their hand).

Spinco will ultimately receive either a brand new name, or take on a banner Kroger plans to retire - eg Vons (provable). It’s not going to take on a flagship banner.

I think we all can see that out west there are some Kroger assets that would make sense for SpinCo. There are also Albertsons assets in some of these same regions that would also make sense for SpinCo.

"Makes sense" for SpinCo is somewhat of a two sided picture.

The SpinCo part of this transaction interests me more than the merger itself at this point (until the integration starts).

This article explains a lot:
https://news.bloomberglaw.com/antitrust ... regulators

That's the big question though. Is SpinCo going to simply consist of divested Albertsons assets or are Kroger assets going to be transferred into SpinCo.

To me, it "makes sense" for Kroger to divest off QFC, Mariano's, and all of F4L/FCO. These are misfit formats/stores. Why go forward with them for the merged company? Dump them and most divest concerns in those regions are satisfied.

But from SpinCo's perspective, is a chain made up of QFC, Mariano's, and F4L going to be a viable operation going forward? No way. Would they even be able to find buyers for those stores if they wanted to sell them off? Again, very tough sell. These are misfit stores. Some Mariano's have terrible high cost leases also.

SpinCo being a Cerberus enterprise is going to be looking for something that can operate successfully but also something that can be marketed in pieces to other buyers. On the Kroger side of the table, keeping present Kroger assets (even the 3 misfits I mention above) under Kroger makes sense as it keeps the current Kroger ecosystem in tact/untouched and it can keep going on as it is.

And this is why when you read the first post in this thread you see SpinCo as currently designed will consist of ALBERTSONS assets only (not anything from Kroger) and will be spun off FROM ALBERTSONS before the merger closes and this SpinCo stock will be part of the compensation to Albertsons shareholders. SpinCo as currently designed is completely an Albertsons thing to get rid of stuff that will cause potential FTC issues before they merge what is left into Kroger. There is no discussion of a vehicle to move Kroger assets into SpinCo (this could obviously change, but it would really mud things up and halfway defeat the purpose of SpinCo being designed the way it was).

The article link above explains it all. The benefit of doing it this way is Kroger does not have to do ANYTHING with divesting stores. Kroger doesn't even have to think about divesting stores, finding buyers, notifying its employees their store was divested, cutting stores off from its distribution network, etc. That will all be a task for Albertsons and that will all be handled before the merger even goes through. Kroger negotiated a price premium with Cerberus and is actually paying a little more for the Albertsons company as a result of this deal being done this way. Kroger did not want to screw around with divesting stores especially its own stores.

The way I expect Kroger to approach this whole deal is to make things as disruptive as possible for Kroger. That means you keep Kroger operations operating as they are.

At the end of the day I see 400-600 stores going to "SpinCo" along with the banners Albertsons and Vons. My guess is many existing Albertsons Stores will go to SpinCo. At this point stores remaining under the banner "Albertsons" are good stores that have survived... a lot, and mostly larger stores. Cerberus made a successful, profitable chain out of 200 of those stores scattered across a wide geography before and they can do it again. There will be some stipulation in the deal like they have 6 months to convert whatever stores they buy that are under other banners (Safeway, Lucky, Pavilions, Jewel, whatever) to some other name, and conversely, Kroger will have the same time period to convert whatever stores it retains that have the Albertsons and Vons banners, to some other name. This will also speed along the Kroger integration in some of the markets where they have multiple banners running to get that issue quickly alleviated and resolved. I expect banner changes and integrations under Kroger to get going quickly, hot, and heavy, in SoCal, AZ, and NV first.

[arizonaguy]

Again, Kroger is not looking to divest entire banners into Spinco - it’s clear they’d like SpinCo to be comprised of a mixture of Albertsons/ Kroger stores (in other words, they get to cherry pick the stores they keep, although regulators will force their hand).

Spinco will ultimately receive either a brand new name, or take on a banner Kroger plans to retire - eg Vons (provable). It’s not going to take on a flagship banner.

I think we all can see that out west there are some Kroger assets that would make sense for SpinCo. There are also Albertsons assets in some of these same regions that would also make sense for SpinCo.

"Makes sense" for SpinCo is somewhat of a two sided picture.

The SpinCo part of this transaction interests me more than the merger itself at this point (until the integration starts).

This article explains a lot:
https://news.bloomberglaw.com/antitrust ... regulators

That's the big question though. Is SpinCo going to simply consist of divested Albertsons assets or are Kroger assets going to be transferred into SpinCo.

To me, it "makes sense" for Kroger to divest off QFC, Mariano's, and all of F4L/FCO. These are misfit formats/stores. Why go forward with them for the merged company? Dump them and most divest concerns in those regions are satisfied.

But from SpinCo's perspective, is a chain made up of QFC, Mariano's, and F4L going to be a viable operation going forward? No way. Would they even be able to find buyers for those stores if they wanted to sell them off? Again, very tough sell. These are misfit stores. Some Mariano's have terrible high cost leases also.

SpinCo being a Cerberus enterprise is going to be looking for something that can operate successfully but also something that can be marketed in pieces to other buyers. On the Kroger side of the table, keeping present Kroger assets (even the 3 misfits I mention above) under Kroger makes sense as it keeps the current Kroger ecosystem in tact/untouched and it can keep going on as it is.

And this is why when you read the first post in this thread you see SpinCo as currently designed will consist of ALBERTSONS assets only (not anything from Kroger) and will be spun off FROM ALBERTSONS before the merger closes and this SpinCo stock will be part of the compensation to Albertsons shareholders. SpinCo as currently designed is completely an Albertsons thing to get rid of stuff that will cause potential FTC issues before they merge what is left into Kroger. There is no discussion of a vehicle to move Kroger assets into SpinCo (this could obviously change, but it would really mud things up and halfway defeat the purpose of SpinCo being designed the way it was).

The article link above explains it all. The benefit of doing it this way is Kroger does not have to do ANYTHING with divesting stores. Kroger doesn't even have to think about divesting stores, finding buyers, notifying its employees their store was divested, cutting stores off from its distribution network, etc. That will all be a task for Albertsons and that will all be handled before the merger even goes through. Kroger negotiated a price premium with Cerberus and is actually paying a little more for the Albertsons company as a result of this deal being done this way. Kroger did not want to screw around with divesting stores.

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.

[retailfanmitchell019]

To me, it "makes sense" for Kroger to divest off QFC, Mariano's, and all of F4L/FCO. These are misfit formats/stores. Why go forward with them for the merged company? Dump them and most divest concerns in those regions are satisfied.

But from SpinCo's perspective, is a chain made up of QFC, Mariano's, and F4L going to be a viable operation going forward? No way. Would they even be able to find buyers for those stores if they wanted to sell them off? Again, very tough sell. These are misfit stores. Some Mariano's have terrible high cost leases also.

SpinCo being a Cerberus enterprise is going to be looking for something that can operate successfully but also something that can be marketed in pieces to other buyers. On the Kroger side of the table, keeping present Kroger assets (even the 3 misfits I mention above) under Kroger makes sense as it keeps the current Kroger ecosystem in tact/untouched and it can keep going on as it is.

And this is why when you read the first post in this thread you see SpinCo as currently designed will consist of ALBERTSONS assets only (not anything from Kroger) and will be spun off FROM ALBERTSONS before the merger closes and this SpinCo stock will be part of the compensation to Albertsons shareholders. SpinCo as currently designed is completely an Albertsons thing to get rid of stuff that will cause potential FTC issues before they merge what is left into Kroger. There is no discussion of a vehicle to move Kroger assets into SpinCo (this could obviously change, but it would really mud things up and halfway defeat the purpose of SpinCo being designed the way it was).

As you have said earlier, I think SpinCo should and will be the remaining stores left with an Albertsons sign. I think it should include all Albertsons brand stores left, outside of Texas/Louisiana, which should be parted out to HEB. It could also include Safeways that were formerly Albertsons such as stores in Colorado or Washington. Those stores could be converted back to Albertsons. But what could happen is SpinCo could become another Kmart-like disaster that will be liquidated. I hope that doesn't happen.

I think Loblaws should scoop up SpinCo and give the stores President's Choice store brands. The Albertsons brand needs a fighting chance.