Save Mart adds Bob Miller to Board

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Re: Save Mart adds Bob Miller to Board

Post by HCal »

ClownLoach wrote: February 2nd, 2023, 9:14 am
Doesn't have to be. The FTC settlements of previous mergers mandated that the stores selected needed to be offered for sale individually. The merger agreement is not the law.

Having said that, it is possible that the Save Mart folks are building up to be able to put in a superior bid for everything.
I think the whole reason they proposed SpinCo in the first place was because they were concerned about their ability to find buyers for all the divested stores. There just aren't a lot of candidates available, unless someone like Ahold swoops in and buys them as a package. The smaller chains like Stater Bros., Raley's and Smart & Final may cherry-pick a few locations, but they can't take too many or it will become another Haggen fiasco and the FTC won't allow that.

SpinCo, therefore, enables Krobertsons to cast off any store without a problem. They don't have to worry about antitrust concerns, they don't have to worry about whether the buyer has financing, they don't have to deal with opposition from unions. SpinCo can take any store they choose to give it.

The merger agreement is not the law, but the merger can only happen in compliance with the agreement. Right now, as far as we know, it only provides for divestitures to go to SpinCo, which will be owned by Albertsons shareholders. Selling the stores to someone else would require renegotiating the whole thing, and I'm not sure that is feasible at this stage.
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Re: Save Mart adds Bob Miller to Board

Post by Romr123 »

It is interesting to think about (numbers entirely fictional) that, say 500 stores to SpinCo would cost SpinCo say 7 billion dollars, but 600 would cost 6.5 billion (i.e diving deeper into the dog stores is going to cost Kralbertsons real money)
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Re: Save Mart adds Bob Miller to Board

Post by pseudo3d »

storewanderer wrote: February 1st, 2023, 11:56 pm
I don't think there will be a "SpinCo." I think Save Mart IS going to be the "SpinCo."

The people running Haggen did not have experience running large grocery chains across multiple regions. That was a situation where management was not the right management and the wholesaler situation especially in SoCal with Unified was a total fiasco.
Save Mart is in a better situation than Haggen but it doesn't matter. A regular airborne bomb may do less damage than a nuke but that isn't going to matter when you're in the epicenter--you're dead anyway. As-is Save Mart has about 200 stores but taking on any substantial number of stores is going to be nothing less than unqualified disaster.

Let's go over the facts here.
- Kroger has been extremely vague about the prospects of the divested stores or the reorganization of stores, as a result we know almost nothing about SpinCo or the organizational structure of Kroger post-merger. There is no guarantee that they will sell off brands or facilities.
- Historically, selling off divisions wholesale is a risky prospect. The divisions that Safeway sold off in the 1980s were destroyed under the fact that their acquiring companies collapsed under the weight of debt or the stores that were acquired. The one exception was Vons and the SoCal division, and that came with the prospect of Safeway taking "insurance" with a third of the company and right of first of refusal. They cashed on this insurance policy about a decade later, bagging Vons and including many of those stores they sold to them.
- If you look at more recent history, none of the Albertsons divisions from 2001 to 2008 were sold off in their entirety except for one. When Larry started pulling out of markets and dismantling the companies, the San Antonio division was closed (some stores sold to H-E-B but not many), the the Houston division was closed (stores sold to Kroger, Randalls, and others), and the Mid-South division was closed (Schnucks, Publix). Going further into the breakup of the company, all of the stores were sold off were in chunks of no more than 50 (the largest single acquisition was about 49 stores with Publix in 2008, and even then they didn't take on the Florida Division) and no single division sold off in its entirety. The one exception to this was selling off the entire NorCal division to Save Mart at 130 stores, which nearly doubled the size of the company but produced some very substantial growing pains that they have been just able to overcome, and the number of Save Mart stores today is less than when they acquired Albertsons NorCal (204 vs. 254 at peak).
- The divisions that would be affected compose of the Northwest United States, Southwest, SoCal, Chicagoland and Texas/Louisiana. (Washington DC and Denver may be irrelevant, just as they were in the Safeway/ABS merger).
- None of these are in Save Mart's territory and entering new territory via acquisitions is going to be harder than normal. Compounding this is that these will be castoff stores. Recall in the 1999 divestments, the stores that tried to enter new territories with their acquisitions (Ralphs, Raley's) failed.
- If Save Mart tries to pick up 200 stores in areas that they aren't native to and double the size of their business, they will most likely fail. They will likely will not be able to supply all of them with their own facilities. With Albertsons NorCal they not only got the distribution center but the prime locations of that division as it included everything.
- It is unlikely Save Mart is interested in the Southwest stores and even less interested in the Texas/Louisiana/Chicagoland stores (not that they could afford it).
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Re: Save Mart adds Bob Miller to Board

Post by storewanderer »

pseudo3d wrote: February 2nd, 2023, 2:27 pm
storewanderer wrote: February 1st, 2023, 11:56 pm
I don't think there will be a "SpinCo." I think Save Mart IS going to be the "SpinCo."

The people running Haggen did not have experience running large grocery chains across multiple regions. That was a situation where management was not the right management and the wholesaler situation especially in SoCal with Unified was a total fiasco.
Save Mart is in a better situation than Haggen but it doesn't matter. A regular airborne bomb may do less damage than a nuke but that isn't going to matter when you're in the epicenter--you're dead anyway. As-is Save Mart has about 200 stores but taking on any substantial number of stores is going to be nothing less than unqualified disaster.

Let's go over the facts here.
- Kroger has been extremely vague about the prospects of the divested stores or the reorganization of stores, as a result we know almost nothing about SpinCo or the organizational structure of Kroger post-merger. There is no guarantee that they will sell off brands or facilities.
- Historically, selling off divisions wholesale is a risky prospect. The divisions that Safeway sold off in the 1980s were destroyed under the fact that their acquiring companies collapsed under the weight of debt or the stores that were acquired. The one exception was Vons and the SoCal division, and that came with the prospect of Safeway taking "insurance" with a third of the company and right of first of refusal. They cashed on this insurance policy about a decade later, bagging Vons and including many of those stores they sold to them.
- If you look at more recent history, none of the Albertsons divisions from 2001 to 2008 were sold off in their entirety except for one. When Larry started pulling out of markets and dismantling the companies, the San Antonio division was closed (some stores sold to H-E-B but not many), the the Houston division was closed (stores sold to Kroger, Randalls, and others), and the Mid-South division was closed (Schnucks, Publix). Going further into the breakup of the company, all of the stores were sold off were in chunks of no more than 50 (the largest single acquisition was about 49 stores with Publix in 2008, and even then they didn't take on the Florida Division) and no single division sold off in its entirety. The one exception to this was selling off the entire NorCal division to Save Mart at 130 stores, which nearly doubled the size of the company but produced some very substantial growing pains that they have been just able to overcome, and the number of Save Mart stores today is less than when they acquired Albertsons NorCal (204 vs. 254 at peak).
- The divisions that would be affected compose of the Northwest United States, Southwest, SoCal, Chicagoland and Texas/Louisiana. (Washington DC and Denver may be irrelevant, just as they were in the Safeway/ABS merger).
- None of these are in Save Mart's territory and entering new territory via acquisitions is going to be harder than normal. Compounding this is that these will be castoff stores. Recall in the 1999 divestments, the stores that tried to enter new territories with their acquisitions (Ralphs, Raley's) failed.
- If Save Mart tries to pick up 200 stores in areas that they aren't native to and double the size of their business, they will most likely fail. They will likely will not be able to supply all of them with their own facilities. With Albertsons NorCal they not only got the distribution center but the prime locations of that division as it included everything.
- It is unlikely Save Mart is interested in the Southwest stores and even less interested in the Texas/Louisiana/Chicagoland stores (not that they could afford it).
I would have agreed with everything you are saying above impacting the current situation before Save Mart installed its current management team. But this is a completely different situation now. This is a management team that is experts at running Albertsons Stores and knows how to run them and get them to how they were when the chain was successful in the 90's.

I actually think the Southwest Stores (particularly if they negotiate to continue the Albertsons banner on the stores... this is a very key thing) could be very good for Save Mart. I would not under any circumstances use the Save Mart banner however. Then again I never would have moved the Save Mart banner out of the central valley either, I would have put the Lucky name on everything from NorCal Albertsons.

Also what if the entire United division is divested to Save Mart? I don't see that as a fit for Kroger anyway. That division still is not integrated into Albertsons other than selling its private labels. That would give Save Mart two "chains" to build out from. They could structure operations of divested stores after Save Mart or they could structure after United-TX.

Reading between the lines it is clear Save Mart is ready to take on new stores. They have stated an interest in expanding Food Maxx also recently, so it is now clarified this new management team likes that format too (I wasn't sure of that based on the history of Albertsons and discount formats, and how quickly Cerberus closed the Super Savers and Cub divests). Read between the lines- I think they would be interested in taking a divest of the entire Food 4 Less/FoodsCo operation and running it as Food Maxx. That would be a pretty seamless conversion (they'd lose some volume due to losing the Kroger private label program).

I do pause at the prospect of divested Safeway/Vons Stores. For some reason (and this played out with Haggen too) divesting these stores and trying to maintain volumes was a real problem. My theory is Safeway/Vons basically suck (especially the ones divested to Haggen) but people tolerated shopping there due to indifference; then when you divest the store to Haggen and suddenly it sucks even more, you just can't take it anymore so you leave. I am not sure how Save Mart would do with a lot of those. In regions like Southwest where a sizable percentage of stores needing to be divested will have the Albertsons banner (Las Vegas, Albuquerque, some scraps left around Phoenix) those Safeway units are being run more like an Albertsons as it stands so it would probably work there. But in a place like Portland or Seattle I am not sure how it would go. Denver Safeway is run so poorly just getting someone in there who would get some life into the stores and fill the perimeters back up would increase volumes.

The key I see here is if Save Mart is able to negotiate this deal in a way where they take ownership of the stores, but then there is no banner change, no "3 day closure," etc. And I think the people running Save Mart know how to negotiate this in a way that they protect their interests. They have some heavy bargaining chips here because I don't think there are many qualified buyers and they are going to be a pretty powerful negotiating factor due not only to who they have hired but also due to the lack of qualified buyers.

Kroger wants this merger done (I guess). Save Mart wants stores and has installed the tenured management team that knows how to run the very stores that need to be sold off. Or keep them running until they can sell them to other parties. It looks to me like this is a great match.
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Re: Save Mart adds Bob Miller to Board

Post by HCal »

storewanderer wrote: February 2nd, 2023, 10:59 pm They have some heavy bargaining chips here because I don't think there are many qualified buyers and they are going to be a pretty powerful negotiating factor due not only to who they have hired but also due to the lack of qualified buyers.

Kroger wants this merger done (I guess). Save Mart wants stores and has installed the tenured management team that knows how to run the very stores that need to be sold off. Or keep them running until they can sell them to other parties. It looks to me like this is a great match.
Kroger knows there will be few to no qualified buyers. That is why they are proposing to set up SpinCo. SpinCo eliminates the need for qualified buyers, because Albertsons and SpinCo will initially have common ownership and obviously that ownership is more concerned about the merger going through than the fate of the divested stores. Even if SpinCo stock crashes the day it starts trading and they go bankrupt a few weeks later, it will still be worth it from their perspective.

So why bother negotiating with Save Mart, which will probably give them a lowball offer, when they can just unload the stores to SpinCo and be done with it?
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Re: Save Mart adds Bob Miller to Board

Post by storewanderer »

HCal wrote: February 5th, 2023, 3:42 am

Kroger knows there will be few to no qualified buyers. That is why they are proposing to set up SpinCo. SpinCo eliminates the need for qualified buyers, because Albertsons and SpinCo will initially have common ownership and obviously that ownership is more concerned about the merger going through than the fate of the divested stores. Even if SpinCo stock crashes the day it starts trading and they go bankrupt a few weeks later, it will still be worth it from their perspective.

So why bother negotiating with Save Mart, which will probably give them a lowball offer, when they can just unload the stores to SpinCo and be done with it?
By turning SpinCo into something that is overseen by experienced, veteran grocers, any concerns the FTC, unions, and others may raise about SpinCo should be countered. Given the management team Save Mart has established I expect they will have no problem finding investors to fund this venture.

My guess is the way this plays out is SpinCo as proposed in the merger agreement will exist for about two seconds, at which point some/all of Cerberus and friends exits SpinCo, and the Save Mart Investment Group enters SpinCo, and Save Mart and SpinCo become essentially the same thing. Whether or not this SpinCo actually ends up as a publicly traded entity or is privately held remains to be seen.

The formula to calculate the sale price of stores to SpinCo is already defined in the merger agreement. I consider that formula to represent the "floor" value for the stores being sold. There are different formulas depending if the store is a Kroger or an Albertsons. I also found it odd the merger agreement spelled out those different formulas since as you interpret, which I too interpreted, the way the agreement reads, SpinCo would be made up of only Albertsons Stores.

Where this may get interesting is if some stores are such hot numbers, they get sold separately (for a higher price) and do not become part of SpinCo/Save Mart. I suspect we may see some of that.
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Re: Save Mart adds Bob Miller to Board

Post by Bagels »

HCal wrote: February 1st, 2023, 8:06 pm I don't really understand this. Kroger and Albertsons have said that they are going to spin off the divested stores into a new company called Spinco for now. They have said nothing about selling stores to existing businesses.
We went through this last fall in the primary merger thread. Kroger’s preference is to SELL the stores it believes it will have to divest. SpinCo is simply a vehicle to dump those stores into should they not be able to find a suitable buyer. Ideally, SpinCo will not have to exist.
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Re: Save Mart adds Bob Miller to Board

Post by Bluelightspecial »

storewanderer wrote: February 5th, 2023, 10:21 am
HCal wrote: February 5th, 2023, 3:42 am

Kroger knows there will be few to no qualified buyers. That is why they are proposing to set up SpinCo. SpinCo eliminates the need for qualified buyers, because Albertsons and SpinCo will initially have common ownership and obviously that ownership is more concerned about the merger going through than the fate of the divested stores. Even if SpinCo stock crashes the day it starts trading and they go bankrupt a few weeks later, it will still be worth it from their perspective.

So why bother negotiating with Save Mart, which will probably give them a lowball offer, when they can just unload the stores to SpinCo and be done with it?
By turning SpinCo into something that is overseen by experienced, veteran grocers, any concerns the FTC, unions, and others may raise about SpinCo should be countered. Given the management team Save Mart has established I expect they will have no problem finding investors to fund this venture.

My guess is the way this plays out is SpinCo as proposed in the merger agreement will exist for about two seconds, at which point some/all of Cerberus and friends exits SpinCo, and the Save Mart Investment Group enters SpinCo, and Save Mart and SpinCo become essentially the same thing. Whether or not this SpinCo actually ends up as a publicly traded entity or is privately held remains to be seen.

The formula to calculate the sale price of stores to SpinCo is already defined in the merger agreement. I consider that formula to represent the "floor" value for the stores being sold. There are different formulas depending if the store is a Kroger or an Albertsons. I also found it odd the merger agreement spelled out those different formulas since as you interpret, which I too interpreted, the way the agreement reads, SpinCo would be made up of only Albertsons Stores.

Where this may get interesting is if some stores are such hot numbers, they get sold separately (for a higher price) and do not become part of SpinCo/Save Mart. I suspect we may see some of that.
I completely agree. There are Albertsons/Safeway stores in Seattle, Portland, SoCal and possibly Dallas that could generate higher income if sold outside of the Spinco group of stores.
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Re: Save Mart adds Bob Miller to Board

Post by storewanderer »

Bluelightspecial wrote: February 5th, 2023, 8:54 pm

I completely agree. There are Albertsons/Safeway stores in Seattle, Portland, SoCal and possibly Dallas that could generate higher income if sold outside of the Spinco group of stores.
Where this is going to get really interesting is what operators buy those stores. In a lot of instances the buyer who will pay more is very likely to be a non-union operator. So I wonder what will happen. The unions will not like that. That may lead to SpinCo getting a good deal on some prime stores.

In SoCal at least there is Gelson's who can buy stores and is union. But are they in a shape to buy more stores?
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Re: Save Mart adds Bob Miller to Board

Post by HCal »

storewanderer wrote: February 5th, 2023, 10:21 am

The formula to calculate the sale price of stores to SpinCo is already defined in the merger agreement. I consider that formula to represent the "floor" value for the stores being sold. There are different formulas depending if the store is a Kroger or an Albertsons. I also found it odd the merger agreement spelled out those different formulas since as you interpret, which I too interpreted, the way the agreement reads, SpinCo would be made up of only Albertsons Stores.
Interesting, may I ask where you got this information? Have they publicly disclosed the agreement and the formula?
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