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Albertsons sale fears hurt grocery chain’s stock

Shares of Albertsons Inc. sank Thursday on fears that the grocery chain’s plan to sell itself is in jeopardy.
/ Source: Reuters

Shares of Albertsons Inc. sank Thursday on fears that the grocery chain’s plan to sell itself is in jeopardy.

The New York Times reported that Albertsons ended talks with a group of investors seeking to buy the company.

But a source familiar with the matter said that talks were still ongoing and that a deal could come through. Albertsons stock pared some of its early losses, having fallen nearly 10 percent before the market open.

Albertsons could not immediately be reached for comment.

The company put itself up for sale in September amid stiffening competition from discounters. It hired investment bank Goldman Sachs and the Blackstone Group as advisers.

The company, which owns drugstores as well as grocery stores, attracted four groups of private equity bidders.

But in recent weeks, one group took the lead. That group — hedge fund Cerberus Capital, grocery chain Supervalu Inc.  and real estate investment trust Kimco Realty Corp. — is vying for Albertsons’ grocery stores, according to sources close to the auction.

Drugstore chain CVS Corp. has joined the group in an effort to buy some of Albertsons’ drugstores. CVS Thursday said it was in talks to buy the company’s stand-alone Sav-on and Osco drugstores.

According to a CIBC analyst report, Albertsons’ stand-alone drugstore business generates annual sales of $4.2 billion.

CVS said no agreement has been reached with Albertsons.

The group of bidders was prepared to offer about $26 a share for Albertsons — $20 in cash and $6 in Supervalu stock — a source familiar with the discussions said, in a deal worth $9.6 billion.

Supervalu wanted Albertsons’ strongest stores, while Cerberus and Kimco wanted the underperforming ones, the source said. Since Albertsons owns 70 percent of its real estate, Cerberus and Kimco could generate cash by selling off the assets.

A deal was thought to be close, with an announcement coming in the next few days.

CVS said it had sent an e-mail to analysts on Wednesday alerting them to a Thursday conference call on the deal. CVS said on Thursday that it had recalled the e-mail.

Albertsons was considering whether to sell the entire business to the investor group, sell just the drugstores to CVS, or sell just the drugstores and its underperforming stores, the source said.

The progress of the auction remained unclear on Thursday morning.

Boise, Idaho-based Albertsons operate about 2,500 stores in 37 states. Its banners include Albertsons, Acme, Shaw’s, Jewel-Osco and Star Market.