SpinCo

This is the place for general and miscellaneous posts on topics which might extend past the boundaries of any specific region. No non-grocery posts.
Post Reply
storewanderer
Posts: 14379
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 298 times
Contact:
Status: Offline

SpinCo

Post by storewanderer »

New thread to discuss "SpinCo"

What is "SpinCo?" From Kroger Albertsons merger website:
https://www.prnewswire.com/news-release ... 49531.html

"Subject to the outcome of a store divestiture process, the cash component of the $34.10 per share consideration may be reduced by the per share value of a newly created standalone public company ("SpinCo") that Albertsons Cos. is prepared to spin off at closing in conjunction with the regulatory clearance process described further in the Transaction Details below."

"Transaction Details

In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. As described in the merger agreement and subject to the outcome of the divestiture process, Albertsons Cos. is prepared to establish an Albertsons Cos. subsidiary (SpinCo). SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. Kroger and Albertsons Cos. have agreed to work together to determine which stores would comprise SpinCo, as well as the pro forma capitalization of SpinCo. The establishment of SpinCo, which is estimated to comprise between 100 and 375 stores, would create a new, agile competitor with quality stores, experienced management, operational flexibility, a strong balance sheet, and focused allocation of capital and resources to provide customers with continued value and quality service and associates with ongoing compelling career opportunities.

Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing.

The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. This cash dividend is expected to be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022."
storewanderer
Posts: 14379
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 298 times
Contact:
Status: Offline

Re: SpinCo

Post by storewanderer »

So, SpinCo, is a spin out of Albertsons.

Basically you have two steps of Albertsons in this merger:
Path 1: The stores being divested, which go to "SpinCo" and happens before the actual merger
Path 2: After the SpinCo stuff is gone from Albertsons, what is left of Albertsons is then merged into Kroger.

Notice there is no wording here about how potential Kroger assets to be divested would end up in SpinCo (since SpinCo is being formed out of old Albertsons ACI as a spin off), or how anyone would be compensated for such assets. That is why it appears to me the only assets up for being part of SpinCo, are the Albertsons assets.

Based on how this is worded, I don't see how Kroger assets end up in SpinCo. The way the deal is being structured and how the deal flows basically depends on SpinCo being a spin off of Albertsons and only Albertsons assets.

The other thing is this SpinCo is going to be owned by the old Albertsons shareholders, so, Cerberus and friends will control SpinCo and the minority common ACI shareholders will have these shares in SpinCo as well. I have to think whatever they plan to do with SpinCo, is going to end up making them money. This is so much like the old Albertsons LLC formed in 2006 by Cerberus, the only difference is this SpinCo thing will go out and trade in the open market immediately.

It will be interesting to see who the management team is that will lead SpinCo. If they put experienced grocery people in charge of SpinCo the way they did the Albertsons LLC in 2006, that will say a lot. Given Cerberus and friends are the ones controlling SpinCo, I am not entirely sure they will just let it tank immediately unless it turns into a real estate play for them.
pseudo3d
Posts: 3851
Joined: November 12th, 2015, 7:01 pm
Has thanked: 5 times
Been thanked: 77 times
Status: Offline

Re: SpinCo

Post by 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.
arizonaguy
Store Manager
Store Manager
Posts: 1107
Joined: July 12th, 2013, 6:07 pm
Been thanked: 35 times
Status: Offline

Re: SpinCo

Post by arizonaguy »

pseudo3d wrote: October 15th, 2022, 12:58 am 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.
jamcool
Store Manager
Store Manager
Posts: 1019
Joined: March 5th, 2009, 10:27 pm
Been thanked: 50 times
Status: Offline

Re: SpinCo

Post by jamcool »

Fry’s is Kroger all but in name…a lot of its previous management has moved up into Kroger corporate.
arizonaguy
Store Manager
Store Manager
Posts: 1107
Joined: July 12th, 2013, 6:07 pm
Been thanked: 35 times
Status: Offline

Re: SpinCo

Post by arizonaguy »

jamcool wrote: October 15th, 2022, 8:34 am Fry’s is Kroger all but in name…a lot of its previous management has moved up into Kroger corporate.
Fry's has also been owned by Kroger since 1983 (it was acquired in Kroger's purchase of Dillon's) and the same time as King Soopers.

Unless Kroger is in a dire financial position it's not going to sell off it's highly profitable Fry's division (where it also owns most of the stores outright).
Super S
Posts: 2690
Joined: April 1st, 2009, 9:27 pm
Has thanked: 11 times
Been thanked: 61 times
Status: Offline

Re: SpinCo

Post by Super S »

What I expect to happen in the Pacific Northwest:

Washington and Oregon:

Fred Meyer locations will likely be kept. Many have already been remodeled into Kroger interiors etc. already. Possible name change to Kroger Marketplace, although Fred Meyer has been advertising its 100th anniversary this year, so it's hard to say if that occurs.

Safeway and Albertsons locations in close proximity to Fred Meyer locations: I expect some of these to be divested. Salmon Creek and Battle Ground have one of each brand less than a mile from existing Fred Meyer stores. In the event that Fred Meyer is spun off, the better of the two stores would remain and be remodeled. Likely stores will be rebranded Kroger or will keep the Safeway name with the Albertsons name being phased out (something that has been already gradually occurring)

Safeway and Albertsons locations which are not close to existing Fred Meyer locations: I expect many of these to remain, particularly in smaller towns. Likely to be rebranded to either Kroger or will keep the Safeway name with Albertsons disappearing.

QFC: Division has potential to be spun off. If kept. locations to rebrand to either Safeway or Kroger. Locations near existing Fred Meyer locations likely to close.

Haggen: Division has potential to be spun off. If kept, locations to rebrand to either Safeway or Kroger. Locations near existing Fred Meyer stores likely to close, locations near existing Albertsons or Safeway locations could remain open depending on the age of the stores, with others closing. Haggen seems like a bit of a wild card though.

Idaho:

Fred Meyer locations likely to be kept for the same reasons as Washington and Oregon.

Albertsons: Idaho is where the chain started and the name is still strong, but could be rebranded to Kroger to be more in line with the new company and Fred Meyer locations. Uncertain what will happen at the corporate offices in Boise. Some locations could close if near Fred Meyer locations.

Safeway's presence is in the northern part of Idaho. Possible rebrand to Albertsons if not rebranded to Kroger.

Smith's: the chain's presence is very small now. What stores remain likely to rebrand as Kroger or Albertsons.

The Sav-On name: Not sure if this could see a revival, but it is worth noting that at one point there were Kroger-Sav-On locations in other states, and some Albertsons stores still have Sav-On signage. I know they were not the same chain, but knowing that Albertsons was split into two chains at one time, it's possible.

My guesses are based on what I have seen of the various names as I have traveled throughout the Northwest.
reymann
Personnel Manager
Personnel Manager
Posts: 279
Joined: August 13th, 2014, 8:25 pm
Been thanked: 27 times
Status: Offline

Re: SpinCo

Post by reymann »

i'm starting to wonder if save mart somehow ends up in part of this new spinco being developed and use the lucky banner for stores being divested in socal and vegas or we see all remaining save marts being rebranded to lucky as part of this new spinco. then spinco could use sunny select and sunnyside farms for their private label products.
Bagels
Assistant Store Manager
Assistant Store Manager
Posts: 823
Joined: August 20th, 2018, 11:54 pm
Has thanked: 1 time
Been thanked: 12 times
Status: Offline

Re: SpinCo

Post by Bagels »

Kroger isn’t proposing divesting entire divisions - they’re attempting to cherry pick the stores they put into Spinco. Hypothetical example; the relatively new, large Pavilions West Hollywood will become a Ralphs, whereas the ancient (ex-Hughes), super tiny Ralphs West Hollywood (about a mile up the road, and in a shopping plaza that’s much hard to get in and out of- good luck finding parking) will be divested into Spinco.

I wonder if Kroger will give SpinCo any of the Albertsons banners. I’m thinking all of them will be used, sans Vons, Pavilions, the Texas banners and Haggen (but banners will probably be consolidated regionally … this means Albertsons will be retained for Mountain West locations, whereas Safeway will be used only on NorCal/ Virgina / Hawaii / Alaska). But will Kroger give any of these banners to SpinCo? I wouldn’t be surprised if Kroger retired the Vons/Pavilions banners, so that the divested stores had an unfamiliar name, but regulators may demand otherwise.
veteran+
Valued Contributor
Valued Contributor
Posts: 2233
Joined: January 3rd, 2015, 7:53 am
Has thanked: 1202 times
Been thanked: 71 times
Status: Offline

Re: SpinCo

Post by veteran+ »

Bagels wrote: October 15th, 2022, 10:06 am Kroger isn’t proposing divesting entire divisions - they’re attempting to cherry pick the stores they put into Spinco. Hypothetical example; the relatively new, large Pavilions West Hollywood will become a Ralphs, whereas the ancient (ex-Hughes), super tiny Ralphs West Hollywood (about a mile up the road, and in a shopping plaza that’s much hard to get in and out of- good luck finding parking) will be divested into Spinco.

I wonder if Kroger will give SpinCo any of the Albertsons banners. I’m thinking all of them will be used, sans Vons, Pavilions, the Texas banners and Haggen (but banners will probably be consolidated regionally … this means Albertsons will be retained for Mountain West locations, whereas Safeway will be used only on NorCal/ Virgina / Hawaii / Alaska). But will Kroger give any of these banners to SpinCo? I wouldn’t be surprised if Kroger retired the Vons/Pavilions banners, so that the divested stores had an unfamiliar name, but regulators may demand otherwise.
That's Ralphs Fresh Fare should just close. Really gross store! Perhaps a specialty format (it's too small for supermarket).

The Pavilions (where I shop) should be a Fresh Fare 🤷‍♂️
Post Reply