Grocery chain Albertsons Inc. struck a deal Monday to sell itself in a $17.4 billion transaction that could lead to the closing and sale of the company’s 58 grocery stores in Colorado, industry experts said.
The Colorado stores, along with Albertsons stores in Dallas, northern California, Florida and the southwestern United States, will go to a group led by New York-based Cerberus Capital Management LP.
Minneapolis-based Supervalu Inc. and CVS of Woonsocket, R.I., also purchased hundreds of Albertsons stores.
Cerberus, which will pay about $1.1 billion, plans to operate its 655 stores under the Albertsons name, but it is expected to revamp or resell many stores, according to published reports.
Cerberus, one of the largest private investment funds in the U.S., has more than $14 billion under management and offices in New York, Chicago, Los Angeles, Japan, South Korea, Taiwan and Germany.
The company’s “trophies” include 226 Burger King restaurants, the National and Alamo car-rental chains, building-products maker Formica Corp. and the old Warner Hollywood Studios, according to BusinessWeek magazine. It also is a large investor in ICG Communications, the Arapahoe County-based telecommunications company.
Some of the prime Colorado Albertsons locations could be resold by Cerberus to grocery chains that have a strong local presence, such as King Soopers, Safeway and Whole Foods, industry analysts said.
Less clear is what the deal means for Albertsons’ 4,000 Colorado employees, about half of whom are unionized, said Dave Minshall, a spokesman for United Food and Commercial Workers Local 7.
“It’s early in the game,” he said. “Obviously, our job is to protect the interest of the workers, and that’s what we’re working on right now.”
Albertsons competitor Supervalu will more than double in size and become the nation’s second-largest traditional grocery- store chain after claiming the lion’s share of the buyout – 1,124 stores and in-store pharmacies under the Osco and Sav-on brands.Supervalu will pay about $6.3 billion in stock and cash and assume about $6.1 billion in Albertsons debt for those assets.
CVS is purchasing about 700 stand-alone Sav-on and Osco drugstores and a distribution center in La Habra, Calif., for $2.93 billion in cash. It will also acquire real-estate interests in the drugstores for $1 billion.
The off-again, on-again deal, which had brewed for more than a month, came after the Albertsons chain lost market share to Wal-Mart Stores Inc.
Chains that don’t already operate in Colorado are unlikely to be interested in taking over the stores Albertsons vacates, one observer said.
“Almost everybody in the grocery business realizes that opening more and more stores hurt more than it helped,” said George Whalin, president of Retail Management Consultants in San Marcos, Calif.
The only major seller of groceries that’s growing with “real purpose” is Wal-Mart, he said. And Wal-Mart tends to build its own buildings.
But if Wal-Mart revives a plan it considered a year ago to open smaller, neighborhood-type stores, buying former Albertsons locations in Colorado could make sense, said Steve Markey, senior associate at the CB Richard Ellis real-estate firm.
“For one reason or another, they pulled back on that idea. But if they revive it, that would be an obvious way to do it,” he said.
If the real estate is put up for sale, one local chain that may consider former Albertsons locations is Longmont-based Sunflower Market, which plans to expand in Denver.
“It depends on what’s available,” said Mike Gilliland, founder of the natural- foods retail chain. “We’d rather not build new. We’d rather use recycled real estate.”
Still, it’s more likely an investor will buy the empty buildings at a discounted price and lease them to nongrocery tenants.
“Colorado has historically been a very difficult market for (grocery) operators to compete in,” said David Fried, senior vice president of Fuller Real Estate.
Local developers also may be interested in redeveloping some of the stores.
“If some were to fall our way that we thought would be successful, we’d do it,” said Jordon Perlmutter, president of Denver-based development firm Jordon Perl mutter & Co.
The Associated Press contributed to this report.
Staff writer Margaret Jackson can be reached at 303-820-1473 or mjackson@denverpost.com.
