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Albertsons updates plan to sell stock to public after 14 years of private ownership

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Posted at 10:06 AM, May 06, 2020
and last updated 2020-05-06 12:06:19-04

This article was originally written by David Staats with the Idaho Statesman.

After years of stepping up, then stepping away, Albertsons Cos. Inc. is getting closer to crossing the line its private-equity owners set for it 14 years ago and selling stock to the public.

The Boise grocer, Idaho’s biggest company, said in a filing with the U.S. Securities and Exchange Commission that it plans to make its initial public offering, or IPO, of stock at a time after its sales have surged in response to the coronavirus pandemic. Tuesday’s filing is a follow-up to Albertsons’ announcement in March that it intends to sell stock soon.

The pandemic has provided grocery stores a significant boost in business, the Idaho Statesman reported Thursday. Albertsons said then that its same-store sales increased 34% during the first eight weeks of its 2020 fiscal year, ending April 25, compared with the same period a year ago. During the four weeks ending March 28, sales jumped 47%.

But in Tuesday’s filing, the company cautioned, “It is too early to predict the permanent impact the coronavirus (COVID-19) pandemic will have on our industry or food-at-home consumption or what the impact on sales will be going forward.”

Like some other large grocery retailers, Albertsons has given coronavirus combat pay to workers on the front lines facing the public. Albertsons has been paying workers an additional $2 an hour.

Tuesday’s filing amends the March announcement with reports of higher profits the company is earning. It said Albertsons, which was losing money through the middle of the past decade, earned $466 million in profits in the year that ended Feb. 29, more than three times as much as the previous year.

55,000 WORKERS HIRED, $2 BILLION BORROWED

The filing said Albertsons has hired over 55,000 workers since March 1 and borrowed $2 billion in March as a precautionary measure.

‘At Albertsons, we are just beginning the next chapter in our rich history, and we welcome you to join us on this exciting journey,” President and CEO Vivek Sankaran said in a letter to prospective shareholders.

Joe Albertson founded the company in 1939 with a store at 16th and State streets. A successor store still stands just north of the original.

In 2006, the original Albertsons Inc. broke apart amid continuing losses. Supervalu, a Minnesota grocery wholesaler, bought most of the company, including all the Albertsons supermarkets in Idaho and various chains under other names. Cerberus led a private-investment consortium that bought 660 supermarkets carrying the Albertsons name — stores Supervalu didn’t want — in the South and Southwest.

That resulted in two chains under the Albertsons banner. Both shrank. Supervalu failed to make its stores profitable, and in 2013 the Cerberus consortium, thriving with its 190 remaining Albertsons stores (still run quietly from Boise), bought Supervalu’s 877 remaining stores carrying multiple banners. What was left of the old company was reunited.

DEBT, USED FOR ACQUISITIONS, IS BEING PAID DOWNThen, in 2015, Albertsons bought California-based Safeway, an even bigger company. While gaining 1,325 stores, Cerberus saddled Albertsons with $8.9 billion in debt.

Albertsons announced plans for an IPO of 65 million shares but backed out after investors looked to pay $17 a share, much less than the $23 to $26 that Cerberus and its partners wanted.

In 2018, Albertsons planned once again to go public after agreeing to buy most of drugstore chain Rite Aid Corp. But the companies abandoned their $24 billion merger after one of Rite Aid’s largest investors criticized the deal as bad for Rite Aid shareholders. The IPO was shelved again.

Albertsons lost hundreds of millions of dollars through 2016 but has been profitable since, with net income rising each of the past two years. Tuesday’s filing said Albertsons as of Feb. 29 had $8.7 billion debt, compared with $10.6 billion a year earlier.

ALBERTSONS IS NO. 2 GROCER AFTER KROGER

The company has remodeled stores and opened larger stores geared toward foodies such as the Broadway Avenue Albertsons in Boise and the Albertsons Market Street store in Meridian.

The company also has invested in technology, sold off some of its real estate and added home delivery and store grocery pick-up options.

The company is the nation’s second-largest grocery chain after Kroger Co., whose brands include Fred Meyer. By revenue, it is about half the size of Kroger, which reported $121 billion in revenue last year. Albertsons operates 2,260 stores under a number of banners, including Safeway, Vons, Jewel-Osco and Haggen.