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Albertsons said Wednesday that funds managed by Apollo affiliates have agreed to buy $1.75 billion of its convertible preferred stock.

Albertsons to sell company stake to Apollo

Supermarket giant filed for IPO earlier this year

Just over two months after filing for an initial public offering (IPO), Albertsons Cos. plans  to sell a more than 17% stake in the company to private equity firm Apollo Global Management.

Albertsons said Wednesday that funds managed by Apollo affiliates have agreed to buy $1.75 billion of its convertible preferred stock. After the repurchase of a portion of common stock owned by current shareholders, Apollo will hold about 17.5% of pro forma common shares outstanding in Albertsons on an as-converted basis, according to the Boise, Idaho-based grocery retailer.

The transaction is expected to be completed by June 15, pending customary closing conditions, Albertsons said. The grocer is owned by an investment group led by private equity firm Cerberus Capital Management.

"Albertsons Cos. is pleased to work with Apollo and its co-investors. Apollo knows our industry and business model well, given its significant prior history of successful investments in the grocery sector. We believe the investment led by the Apollo Funds represents a vote of confidence in both our business and our long-term strategy,” Albertsons Cos. President and CEO Vivek Sankaran said in a statement. “We are also proud to have the continued support of our owners, a consortium led by Cerberus Capital Management LP, which also includes Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners LP and Schottenstein Stores Corp. We appreciate their tremendous support over the years in operations, technology and financing as we have grown our business and our platform, and especially during the COVID-19 pandemic as we focus on the safety and well-being of our associates, customers and communities."

On March 6, Albertsons filed a registration statement for an IPO with the Securities and Exchange Commission, a couple of months after news reports said the supermarket giant was looking to go public.

Two previous attempts by Albertsons to become public fell through. In 2018, the company attempted to go public via a $24 billion merger with Rite Aid Corp., but the deal disintegrated after investor pushback. Investors also tried to take Albertsons public following its 2015 merger with Safeway but then ended up pulling the offering amid lackluster market conditions for retail stocks.

Apollo’s current grocery retail investments include The Fresh Market, which the private equity firm acquired for $1.36 billion in 2016, and Smart & Final, acquired in a $1.12 billion buyout that closed last June. Apollo also had been the controlling owner of Sprouts Farmers Market but sold off its remaining shares in the specialty grocer in 2015 after the chain went public in 2013.

As of its 2019 fiscal year-end on Feb. 29, Albertsons had 2,252 food and drug stores in 34 states and the District of Columbia under such banners as Albertsons, Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Jewel-Osco, Acme, Shaw's, Star Market, United Supermarkets, Market Street and Haggen. The company also operates 1,726 pharmacies, 402 fuel centers, 23 distribution centers and 20 manufacturing plants.

For fiscal 2019, net sales and other revenue at Albertsons Cos. rose 3.2% to $62.46 billion. Identical sales were up 2.1%, and digital sales climbed 39%.

“We are excited to work with the strong management team at Albertsons Cos. and believe the business has compelling growth opportunities ahead via e-commerce penetration, expansion of the company’s innovative Own Brands portfolio, and merchandising and marketing initiatives,” stated Justin Korval, partner in Apollo’s Hybrid Value Business. “This investment, led by our Hybrid Value team in partnership with our Credit platform, marks the third sizable transaction in the last month and exemplifies the breadth of Apollo’s capabilities and the creative capital solutions we can deliver to great companies.”

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