So, what about Casa Ley?

Retail news in Latin America, from Mexico, the Caribbean, and Central/South America
pseudo3d
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So, what about Casa Ley?

Post by pseudo3d »

Today, I was preparing a list of former San Antonio division Albertsons stores that I was hoping to premier on my website soon. I was surprised to find that Albertsons stores went all the down to the border in Texas (then again, they do in California, so maybe I shouldn't be terribly surprised). Anyway, I remembered that while Albertsons doesn't have much influence in Texas south of D-FW (except for the pockets of Randalls stores in Houston and Austin, which hasn't gone anywhere recently), it still has that 49% share of Casa Ley it inherited from Safeway. Since I haven't seen any rush to sell it off (which they had intended to do, give the shares back to the shareholders before the four year or so time limit goes up), does Albertsons actually want to do anything with it?

Apparently, it seems to be of larger square footage than their stores stateside, one that I measured in Google Earth had a floorplan of about 87k square feet, they have their own house brand ("LEY") and also have a wider selection of general merchandise as well (the "Ley" stores have the typical grocery items, including meat and seafood, wines and spirits, produce, but also hardware, electronics, garden, toys, cosmetics) see the red bar under "Formatos", and Super Ley (which oddly seems to be smaller and carry LESS merchandise than the regular stores).

Further digging shows Safeway has owned Casa Ley since 1981 (well, their 49% at least) with the other 51% owned by the Ley family. Did this come from a part of a Safeway division in Mexico that they sold off? (They did it with their SoCal division and Vons, and with the Australia division and Woolworths, so it could be possible) I'm just curious as to why Safeway and now Albertsons have held onto Casa Ley for so long. It should be noted that Safeway was beginning to sacrifice its own domestic divisions before they considered selling off Casa Ley...so I assume it must generate a significant amount of profit for both Safeway and Albertsons. It also seems like a great brand to experiment with for a Hispanic-focused store in cities near the border...
klkla
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Re: So, what about Casa Ley?

Post by klkla »

Safeway never had any divisions in Mexico to my knowledge. IIRC Safeway invested in Casa Ley to help them expand and received the 49% as a result.

I've been in their Puerto Vallarta store a couple times. It's a two story store that sells a lot of general merchandise in addition to groceries. They used to carry some Safeway brands but that was a couple years ago. I doubt they do now.

At the time the merger was announced Safeway was supposed to issue CVR's (cash and contingent value rights) to their shareholders in case the 49% interest could not be sold before the merger closed. There was a class action lawsuit because they did not guarantee any payout after four years and as part of the settlement they agreed to pay holders of Casa Ley CVRs the “fair value” of Safeway’s interest in Casa Ley if this interest is not sold within three years of the closing of the merger worth a minimum $80 million to Safeway's shareholders. The merger closed on January 30th, 2015. Therefore if they do not sale Casa Ley by January 30th, 2018 Albertson's will have to make a payment for the CVR's to Safeway's former shareholders.

As for Safeway's international divisions that I remember: Canada, England, Germany and Australia. They also operated stores in Kuwait and Saudi Arabia but didn't actually own them.
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Re: So, what about Casa Ley?

Post by pseudo3d »

klkla wrote:Safeway never had any divisions in Mexico to my knowledge. IIRC Safeway invested in Casa Ley to help them expand and received the 49% as a result.

I've been in their Puerto Vallarta store a couple times. It's a two story store that sells a lot of general merchandise in addition to groceries. They used to carry some Safeway brands but that was a couple years ago. I doubt they do now.

At the time the merger was announced Safeway was supposed to issue CVR's (cash and contingent value rights) to their shareholders in case the 49% interest could not be sold before the merger closed. There was a class action lawsuit because they did not guarantee any payout after four years and as part of the settlement they agreed to pay holders of Casa Ley CVRs the “fair value” of Safeway’s interest in Casa Ley if this interest is not sold within three years of the closing of the merger worth a minimum $80 million to Safeway's shareholders. The merger closed on January 30th, 2015. Therefore if they do not sale Casa Ley by January 30th, 2018 Albertson's will have to make a payment for the CVR's to Safeway's former shareholders.

As for Safeway's international divisions that I remember: Canada, England, Germany and Australia. They also operated stores in Kuwait and Saudi Arabia but didn't actually own them.
If it's 2018, then time is running out for that, and Albertsons needs to start making some money. As of now, Casa Ley seems too much like dead weight that they can get rid of, especially if it's running its own store brand, yet it already seems too late if they wanted to build some sort of experimental store in Arizona, New Mexico, California, or Texas bearing the Casa Ley name. Unlike American retailers trying to design a "Hispanic" themed store by just some new paint and a new product mix, it might work based on the existing name and format, but the precedent for such ventures have been historically pretty terrible.
klkla
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Re: So, what about Casa Ley?

Post by klkla »

The peso has really dropped in value compared to the dollar over the last two years so that probably has had an impact on Albertson's ability sell their stake in the company. Still, I don't think a payout of $80 million would have that great of an impact on Albertson's.

You can see photos and street view of the Puerto Vallarta store on Google Maps. It looks exactly the same as I remember it:
https://www.google.com/maps/place/Casa+ ... 05.2312803
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Re: So, what about Casa Ley?

Post by pseudo3d »

Times up! Albertsons is selling it to some company I've never heard of (Tenedora, something Google can't help me out with) for $6.5 billion pesos (too bad it isn't a 1:1 ratio, otherwise Albertsons could give shareholders a good deal and have plenty leftover to lower prices and expand the chain). Due to the exchange rate, instead of a little more than a dollar per share, it's about 87-90 cents per share.

https://globenewswire.com/news-release/ ... a-Ley.html
klkla
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Re: So, what about Casa Ley?

Post by klkla »

pseudo3d wrote: January 16th, 2018, 2:08 pm Times up! Albertsons is selling it to some company I've never heard of (Tenedora, something Google can't help me out with) for $6.5 billion pesos (too bad it isn't a 1:1 ratio, otherwise Albertsons could give shareholders a good deal and have plenty leftover to lower prices and expand the chain). Due to the exchange rate, instead of a little more than a dollar per share, it's about 87-90 cents per share.

https://globenewswire.com/news-release/ ... a-Ley.html
I've never heard of this company before. I wonder if it's a holding company created for the purpose of this transaction. The name of the company loosely translates to CL Holding Company of the Northeast.

There was an interesting quote in the article: "Based on a CVR Agreement entered into at the time of the merger, the amount of net proceeds to be distributed will be based on the gross proceeds from the sale of the Casa Ley interest less expenses less taxes (calculated at a tax rate of 39.25% agreed in the CVR Agreement)."

It will be interesting to see if there are any lawsuits about this. It could be argued that Albertson's purposely delayed the transaction so they could benefit from the new lower corporate tax rate of 21%.
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Re: So, what about Casa Ley?

Post by pseudo3d »

klkla wrote: January 16th, 2018, 4:59 pm
pseudo3d wrote: January 16th, 2018, 2:08 pm Times up! Albertsons is selling it to some company I've never heard of (Tenedora, something Google can't help me out with) for $6.5 billion pesos (too bad it isn't a 1:1 ratio, otherwise Albertsons could give shareholders a good deal and have plenty leftover to lower prices and expand the chain). Due to the exchange rate, instead of a little more than a dollar per share, it's about 87-90 cents per share.

https://globenewswire.com/news-release/ ... a-Ley.html
I've never heard of this company before. I wonder if it's a holding company created for the purpose of this transaction. The name of the company loosely translates to CL Holding Company of the Northeast.

There was an interesting quote in the article: "Based on a CVR Agreement entered into at the time of the merger, the amount of net proceeds to be distributed will be based on the gross proceeds from the sale of the Casa Ley interest less expenses less taxes (calculated at a tax rate of 39.25% agreed in the CVR Agreement)."

It will be interesting to see if there are any lawsuits about this. It could be argued that Albertson's purposely delayed the transaction so they could benefit from the new lower corporate tax rate of 21%.
The contract was due in January 2018 and Albertsons had been dragging its feet on this for months. Unless Bob Miller had psychic powers back in 2015 and knew that the corporate tax rate would drop in January 2018, I don't think a lawsuit would gain a lot of ground in that aspect.
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Re: So, what about Casa Ley?

Post by klkla »

pseudo3d wrote: January 16th, 2018, 5:55 pm The contract was due in January 2018 and Albertsons had been dragging its feet on this for months. Unless Bob Miller had psychic powers back in 2015 and knew that the corporate tax rate would drop in January 2018, I don't think a lawsuit would gain a lot of ground in that aspect.
There are almost always lawsuits involving these kind of transactions. Also, I don't he would have needed to be psychic. It's been pretty obvious since November 2016 that a large corporate tax cut was on the way.
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Re: So, what about Casa Ley?

Post by pseudo3d »

klkla wrote: January 16th, 2018, 7:01 pm
pseudo3d wrote: January 16th, 2018, 5:55 pm The contract was due in January 2018 and Albertsons had been dragging its feet on this for months. Unless Bob Miller had psychic powers back in 2015 and knew that the corporate tax rate would drop in January 2018, I don't think a lawsuit would gain a lot of ground in that aspect.
There are almost always lawsuits involving these kind of transactions. Also, I don't he would have needed to be psychic. It's been pretty obvious since November 2016 that a large corporate tax cut was on the way.
There might be a lawsuit, but again, until November 2016, Albertsons had made no effort to sell Casa Ley, and hadn't for the previous two years since the merger closed (and I'm pretty sure the stipulations regarding Casa Ley were drawn up in 2014). If they didn't sell right now, they hit the deadline and would have to pay the CVRs out of pocket, which would be a higher cost to Albertsons, tax cuts or no.
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Re: So, what about Casa Ley?

Post by klkla »

pseudo3d wrote: January 16th, 2018, 7:51 pm There might be a lawsuit, but again, until November 2016, Albertsons had made no effort to sell Casa Ley, and hadn't for the previous two years since the merger closed (and I'm pretty sure the stipulations regarding Casa Ley were drawn up in 2014). If they didn't sell right now, they hit the deadline and would have to pay the CVRs out of pocket, which would be a higher cost to Albertsons, tax cuts or no.
Yes, I understand that. But because they waited so long the Mexican peso dropped 20% in value, which comes out of the shareholders pockets. And because they waited until after the tax cut they are going to net approximately $60,000,000 more. If I was a shareholder I wouldn't be too happy about that.

I have no idea whether such a lawsuit would be successful. I just found all this to be interesting.
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