Albertsons Inc. on Monday said it agreed to sell the company to a consortium of investors that had previously submitted an offer, in a deal worth about $9.6 billion in cash and stock.
The announcement comes nearly one month after a bid from the consortium led by private equity fund Cerberus Capital Management LP which includes real estate investment fund Kimco Realty Corp., Schottenstein Realty, Lubert-Adler Partners and Klaff Realty LP discount grocery group Supervalu Inc. and CVS Corp. fell apart. A revised bid on Thursday offered a few cents more than $26 a share.
The total value of the transaction is $17.4 billion in cash, including debt being assumed by the buyers.
The deal is about $26.29 per share, representing a premium of 27 percent based on the company’s closing share price of $20.73 on Sept. 1, 2005, the day before it announced it would explore strategic alternatives, Albertsons said in a statement.
Under the terms of the agreement, Albertsons’ shareholders will get $20.35 in cash and a fixed ratio of 0.182 shares of Supervalu stock for each Albertsons share. The value of the Supervalu stock, based on a $32.65 average stock price using the 20 day trading average of the closing price of Supervalu stock through Jan. 20, is $5.94, bringing total consideration per share to $26.29.
The transaction is expected to close in mid-2006
Minneapolis-based Supervalu is paying about $6.3 billion in stock and cash and will assume approximately $6.1 billion of Albertsons’ debt for 1,124 Albertsons stores. Also included are all of the combo-store pharmacies, which operate under the Osco and Sav-on banners. These assets would create a company with 2,656 stores in 48 states and approximately $44 billion in revenues, making it the second largest supermarket company in America.
CVS will acquire all of the stand-alone drugstore business, which includes 700 freestanding stores as well as a distribution center in La Habra. CVS will also acquire Albertsons’ ownership interests in the drug store real estate for about $2.9 billion. The Sav-on and Osco brands are not part of the sale to CVS. All stand-alone drugstores included in the transaction will be renamed CVS.
The Cerberus-led consortium will acquire 655 operating stores and all of the distribution centers and offices in Albertson’s Dallas/Fort Worth division, and in the Florida, Northern California, Rocky Mountain and Southwestern regions. The group plans to operate the stores under the Albertson’s name. These stores include the pharmacies under the Osco and Sav-on brands. Cerberus has also purchased 26 Cub Stores from Supervalu in the Chicago area for an undisclosed amount.
Goldman Sachs & Co. and The Blackstone Group L.P. served as financial advisors, and Jones Day served as legal advisor to Albertsons.
Following the close of the deal, Supervalu holders will have about 65 percent of the combined company, which is expected to have annual sales of $44 billion and earnings of about $2.7 billion. Albertsons’ holders will own the other 35 percent.
The Cerberus-led consortium became the lead bidder for Albertsons after the supermarket chain said in September that it was exploring the sale of all or part of its business.
Just before Christmas, the deal failed over disagreements as to who would accept responsibility if regulators tried to block the deal because of antitrust concerns.
