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Report: Albertson's sale near

Analysts say other groups may weigh in with a higher bid than the $9.6-billion that's speculated to be the current price.

An investment group including Cerberus Capital, Kimco Realty Corp. and Minnesota supermarket chain Supervalu Inc. is reportedly near a deal to buy Albertson's Inc., the second-largest U.S. supermarket chain, for about $9.6-billion.

However, analysts and other observers late Friday anticipated that other groups may weigh in with a higher bid.

A tentative deal with the hedge fund Cerberus group, as reported by the Wall Street Journal, would end a three-month auction for Boise, Idaho-based Albertson's, which has suffered from lagging results, a stagnant share price and competition from lower-cost rivals including Wal-Mart Stores Inc.

The Journal, which cited unidentified people familiar with the matter, said Albertson's is in separate talks to sell its pharmacy business to CVS Corp. for as much as $4-billion of the overall purchase price.

The deal as outlined values the supermarket chain at $26 per share. Albertson's shares rose 34 cents, or 1.4 percent, to close Friday at $24.33 on the New York Stock Exchange.

The transaction could be announced after a board meeting this weekend. According to the newspaper's report, the Cerberus group would assume $6.4-billion in Albertson's debt as part of the deal.

"Beyond the Sept. 2 announcement, I have no comment," said Shannon Bennett of Albertson's. The company put itself up for sale on that date. She refused to confirm that its board planned to meet this weekend.

Spokesmen for Cerberus, Kimco and Supervalu did not return phone calls seeking comment.

Cerberus is no stranger to the Tampa Bay area. The hedge fund is the top shareholder in Tampa's Anchor Glass Container Corp., which is preparing to emerge from bankruptcy protection, and owns a stake in Tampa's Walter Industries.

Burt Flickinger III, a retail consultant in New York City, on Friday dismissed the heavy betting on a Cerberus-led victory for Albertson's, suggesting another group may pull off an upset.

"In the past in the supermarket sector, Cerberus has been in the early lead for a long time, then not finished first when the deal gets done," said Flickinger, head of Strategic Resources. "Kroger may be heard from again and I think KKR has an excellent chance to complete the deal."

Regardless of which group makes the winning bid for Albertson's, the future of the chain's Florida stores may remain murky for some time. Some analysts think the locations will be sold for their real estate; others speculate the buyer will continue to operate them as supermarkets.

Albertson's, which has 105 stores in the state and 26 in the Tampa Bay area, ranks fifth among grocery chains locally, with a 7 percent market share. Albertson's has not opened a store in the state in three years.

Flickinger said a buyer like Supervalu could operate the stores corporately or franchise them. Kroger would have a keen interest in using the purchase to get a foothold in Florida, especially with Winn-Dixie in disarray, he said.

"Given that Kroger has had much success (in other markets) capitalizing on Winn-Dixie's weakness, Albertson's Southeast is highly attractive," he said. "There's certainly room for another major competitor between Publix and the supercenters."

Neil Stern of retail consultant McMillan/Doolittle in Chicago said it is unlikely the Florida stores will be closed.

"As long as a store provides cash flow for the owners, they won't be shutting them down," he said.

David Livingston, a supermarket analyst in Pewaukee, Wis., said it is unlikely any buyer would continue Albertson's Florida locations as grocery stores, though they may be sold to stronger chains.

"I think they'll be liquidated for the real estate," he said, adding that Albertson's stores are too big to be converted for Supervalu's Save-A-Lot format. "In Florida, Albertson's can't compete with Wal-Mart on price or Publix on service.

Albertson's was founded in 1939 on a downtown Boise street corner by entrepreneur Joe Albertson, who was among the first American grocery retailers to combine supermarkets with drugstores.

Albertson's trails only the Kroger Co. of Cincinnati among supermarket-only operators, although the food business of Wal-Mart has eclipsed both of them in recent years. Albertson's has about 2,500 stores in 37 states, with about 240,000 workers. It stores include Albertson's, Acme, Shaw's and Jewel while its drugstores include Osco and Sav-on Drugs.

In the three months ended Nov. 3, Albertson's missed analyst expectations for a second quarter in a row and reduced its full-year profit outlook, adding to pressure to find a buyer. In the period, net income declined 30 percent to $77-million, from $110-million in the third quarter of 2004.

For the first nine months of the fiscal year, it earned $284-million, or 76 cents a share, up from $249-million, or 67 cents a share, a year ago. Nine-month sales rose to $30.13-billion from $28.76-billion a year ago.

Times staff writer Kris Hundley contributed to this report.

[Last modified December 17, 2005, 01:01:18]