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The Wall Street Journal reports this morning that “an investment group of Cerberus Capital, Kimco Realty Corp., and grocery chain Supervalu Inc. is poised to win the auction for Albertson's Inc. for about $9.6 billion.”

Albertsons’ board is expected to meet this weekend, at which point an announcement could come. A possibility remains that a competing bid could win out, but sources judge this unlikely.

Analysts believe that part of the deal will consist of a sale of Albertsons’ stand-alone drug stores by CVS.

If it takes place as expected, the buyout would be the second largest leveraged buyout in history, second only to the $29 billion purchase of RJR Nabisco Inc. by Kohlberg Kravis Roberts & Co. in 1988. The Albertsons’ deal’s enterprise value is said to be about $16 billion.

The Journal reports that “Albertson's has been underperforming and its margins have declined steadily. To reverse that will require substantial investment. Cerberus hasn't commented about its plans for Albertson's 2,500 stores, but those familiar with the bid say it relies heavily on their real-estate value, and less on continuing operations.”

It also is expected that parts of Albertsons will be sold off, depending on whether Supervalu has interest in operating them.
KC's View:
Good luck.

Don’t know what else to say.