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The New York Times reports this morning that Albertsons’ board of directors has decided to reject a $9.6 billion offer for the company put forth by a consortium that included Supervalu, CVS, investment fund Cerberus Capital Management, and real estate firm Kimco Realty.

According to the NYT, which says it is unclear why the bid was rejected, “The buying group had planned to break Albertson's up into three parts by splitting the supermarket business in two and merging the drugstore business with CVS. A series of acquisitions over the years have helped Albertson's become the second-largest supermarket chain in the country. Its units include American Stores, Shaws, Jewel Osco, Acme Markets, Sav-on and Osco Drug stores.”

The Wall Street Journal, while less sure than the Times in its coverage that the bid would be rejected, notes that the offer was in the “lower range of what the company had been hoping to attract when it put itself on the auction block in September.”

The Times says that Albertsons’ board will now consider its other alternatives, including possibly selling some underperforming stores and its drugstore business, and then using those funds to recapitalize.

The WSJ suggests that the collapse of the deal “could expose the company's stock to a steep drop and leave investors wondering about the retailer's future strategy.”
KC's View:
This must be a rude awakening for those folks who thought they’d be able to cash out of the Albertsons mess and move onto other things.

Though it seems likely that all this means is that there will be a slower dismantling of the company, as opposed to a quick sale and break-up of Albertsons’ assets.

While Albertsons’ board may not think that the offer was high enough, it seems to us that with every day that passes, the company’s value actually drops, the employees’ commitment and belief in their employer becomes more uncertain, the competition becomes more emboldened, and the likelihood that customers will choose Albertsons becomes diminished.

Which isn’t exactly a business model on which to build.