business news in context, analysis with attitude

Albertsons Inc, a 2500-store chain bearing one of the great names in American retailing – Joe Albertson, who founded the company as a single store in 1939 – was sold this morning for $9.8 billion. (Including debt, the deal is valued at $17.4 billion.)

The buyers are a consortium of companies that will break Albertsons into three parts.

According to published reports this morning, the deal breaks out this way:

• Supervalu will acquire 1100 stores, becoming the nation’s second largest food retailer. To do so and avoid antitrust issues, Supervalu will sell its Chicago-area Cub stores to Cerberus Capital Management LP and Kimco Realty Corp. Among the assets that now will belong to Supervalu are Acme Markets, Bristol Farms, Jewel-Osco and Shaw Supermarkets, many of them is urban locations that Supervalu has not previously served.

• CVS will buy 700 stand-alone Sav-On and Osco drugstores, giving it 6100 stores nationwide; the Albertsons seal gives it a new and solid foundation in the American west.

• An investor group that includes Cerebrus Kimco Realty will buy 655 Albertsons and Super Saver stores and a number of distribution centers., as well as the Chicago Cub stores from Supervalu

Under its current CEO, Larry Johnston – who came to the company from GE with little in the way of retailing experience or expertise – Albertsons has struggled to compete with Wal-Mart and has experienced declining same store sales for eight of the last 14 quarters.
KC's View:
Now is the hard part. Supervalu has to get all of these new employees on board, has to revitalize the stores, re-energize the customers, and really begin to market the various Albertsons brands in effective and compelling ways.

Someone told us recently that this will be the deal that will be the defining moment in Supervalu CEO Jeff Noddle’s career, regardless of how it turns out. That’s true. We hope for his sake, and for the companies’ sakes, that the rest of the story is a positive one.

Meanwhile, somewhere in Boise, Larry Johnston is singing…

Turn out the lights
The party's over
They say that
All good things must end
Call it tonight
The party's over
And tomorrow starts
The same old thing again…

Of course, as he does so he’s probably counting his money. Which means he’s smiling.

We’re not sure that Joe Albertson is.