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U.S. grocery chain Albertsons to press ahead with IPO: sources

Published 09/15/2015, 03:15 PM
Updated 09/15/2015, 03:18 PM
© Reuters. Birds perch upon signage for an Albertsons grocery store in Burbank, California
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By Lauren Hirsch and Greg Roumeliotis

(Reuters) - U.S. supermarket chain Albertsons Companies Inc is moving ahead with plans for an initial public offering in late September or early October that could value it as much as $24 billion, including debt, according to people familiar with the matter.

The determination of Albertsons' majority owner, private equity firm Cerberus Capital Management LP, to carry out the IPO despite volatility in the stock markets underscores its confidence that it can fetch a high valuation for Albertsons.

Cerberus is looking to capitalize on the strong performance of larger Albertsons rival Kroger Co (N:KR), the sources said. In marketing IPOs, companies often use peers as reference for pricing.

Kroger announced earnings last week that beat both profit and same-store sales expectations. It posted earning per share of $0.44, and same store sales growth of 5.3 percent, excluding fuel.

Kroger is trading at approximately 8.23 times its projected 12-month earnings before interest, tax, depreciation and amortization, according to Thomson Reuters data.

As Albertsons markets itself to investors, it will tout still unrealized synergies from the Safeway merger and potential acquisition opportunities, the sources said, asking not to be identified because the matter is confidential.

The listing date could change based on market conditions, the sources said. Albertsons initially filed to go public in early July. It is common for companies that file to go public to not initially provide a date in which they expect to launch.

Albertsons and Cerberus declined to comment.

The grocery market remains highly segmented, with the top three players, Publix Super Markets, Albertsons and Kroger collectively representing just 27 percent market share, according to IBIS World.

Albertsons is pursuing the flotation despite a lawsuit filed by West Coast grocery chain Haggen, which filed for bankruptcy this week. Haggen has accused Albertsons of misrepresenting the financial health of stores that Albertsons sold to Haggen and competing unfairly against it.

Albertsons sold Haggen the stores in order to win approval for a $9.2 billion merger with Safeway, which closed in January. As part of the merger, Albertsons divested 168 stores, 146 of which were to Haggen.

Albertsons has denied the allegations.

© Reuters. Birds perch upon signage for an Albertsons grocery store in Burbank, California

Based in Boise, Idaho, Albertsons operates more than 2,200 supermarkets, including 1,247 Safeway stores.

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