BOISE, Idaho - Albertsons management here was reportedly scheduled to meet this past weekend to consider the bids it has received for the company in the first auction round.
pt one of the bids and announce a sales agreement, most observers said they believe that is an unlikely scenario. What's more likely, they told SN, is that Albertsons will seek stronger bids from auction participants over the next few weeks.
Trade reports indicated the initial bids may have been lower than the $25 per share the company had hoped to elicit.
Industry sources told SN the top cash bid may have come from the Cerberus Group, in partnership with Kimco Realty and Supervalu, with an offer of around $26, including Supervalu stock.
The sources said Yucaipa Cos. submitted a differentiated bid - involving an offer other than straight cash - that may have met or exceeded the Cerberus bid.
However, a group headed by Kohlberg Kravis Roberts & Co., which includes Apollo Advisors and Texas Pacific Co., reportedly submitted a bid around $23, close to the price Albertsons' stock was selling for on Dec. 8, the day bids were due, with the advisory that Albertsons should come talk to it if other bids were unsatisfactory. "In essence, KKR did not submit a [realistic] bid in hopes that no other offer would be attractive to the company," one observer told SN.
With all parties having signed confidentiality agreements, no one was available to comment on the record about what bids were or were not submitted and in what amounts.
John Heinbockel, an analyst with Goldman Sachs, New York - whose separate investment banking division is one of Albertsons' advisers in the selling process - said in a written report he was surprised by media reports Supervalu would be willing to issue equity because that approach "runs counter to the company's financial discipline and focus on return on invested capital. Since equity carries the highest cost of capital, it would seem more logical to tap [the balance sheet and debt capacity] first."
Heinbockel said any buyer is likely to sell off some assets once a deal is made to defray any significant debt burden, with the likeliest candidates for sale being the 471 Albertsons stores in Texas, Florida, Colorado and Arizona, "[and] it is highly likely that meaningful numbers of stores will end up in Kroger's or Safeway's hands, with others going completely dark, removing excess capacity from the system," he noted.
