The Spokesman-Review Newspaper
The Spokesman-Review Newspaper The Spokesman-Review
Spokane, Washington  Est. May 19, 1883
Current Temperature
46°F
Current Conditions
Few clouds
View complete weather report
Subscribe now

Albertsons deal near, sources say

Wal Street Journal

NEW YORK – An investment group of Cerberus Capital, Kimco Realty Corp., and grocery chain Supervalu Inc. is poised to win the auction for Albertsons Inc. for about $9.6 billion, or $26 a share, say people familiar with the matter.

An announcement of the deal could come some time after Albertsons board meets this weekend, say people familiar with the matter. The Boise, Idaho, company is still hashing out details with drugstore retailer CVS Corp., which is in the lead to purchase the company’s well-regarded drug chain for up to $4 billion of the overall purchase price.

It is still possible that a rival team of investors could swoop in with a higher offer, say people familiar with the matter. And last-minute negotiations could derail a final contract. But for now, groups of competing investors have resigned themselves to Cerberus striking what will be the second-largest leveraged buyout in history – with an enterprise value of about $16 billion, when adding the company’s $6.4 billion in net debt. The largest was the $29 billion purchase of RJR Nabisco Inc. by Kohlberg Kravis Roberts & Co. in 1988.

Eleven of the 20 largest leveraged buyout deals have been struck in 2005, according to Thomson Financial data. Representatives from Cerberus, Kimco and Supervalu didn’t return calls seeking comment. A CVS spokeswoman and an Albertsons spokeswoman declined to comment.

A deal could set the stage for heavy layoffs and store closings, as the 66-year-old grocery empire gets picked apart in the face of poor financial results and mounting market power from Wal-Mart Stores Inc.

Fear of Wal-Mart’s heft was one reason for the lack of enthusiasm on the part of the broader private-equity community. Even relative to other grocery chains, Albertsons has been underperforming, and its margins have declined steadily. Reversing that will require substantial investment.

Cerberus hasn’t commented about its plans for Albertsons 2,500 stores, but those familiar with the bid say it relies heavily on their real-estate value.