Albertsons Supermarket IPO Aims To Raise $1.9 Billion

The second largest grocery store chain in the US, Albertsons, is preparing to launch its IPO on the New York Stock Exchange.  As of this moment, Albertsons plans on offering 65.3 million shares between $23-26 per share.  There is also an additional 9.8 million shares set aside just in case there is stronger demand than anticipated.  All in all, Albertsons could raise roughly $1.9 billion if they were to sell all shares. This puts Albertsons’s valuation around $12 billion on the higher end.  Additionally, Albertsons is said to trade under the ticker “ABS”.

Cerberus Capital Management hopes “new” Albertsons will be able to compete with other rival grocers

Cerberus Capital Management bought up Albertsons back in 2006, in an attempt to revive the struggling brand and propel the company back into the limelight.  Cerberus upped the ante this year when the company purchased Albertsons rival, Safeway Inc. (SWY) Inc. for $9.4 billion.  The combined supermarket company now is the second largest chain in the US with over 2,200 stores.  In addition to Albertsons and Safeway, Cerberus Capital Management also has 17 grocery store chain in the mix such as Jewel Osco, Acme, Carrs, Vons, and more. Cerberus Capital Management has built an impressive grocery chain that, they hope, will be able to compete with the number one chain grocer, The Kroger Co. (KR) and other grocery providers such as Wal-Mart Stores Inc. (WMT), Target Corp. (TGT), and Whole Foods Market, Inc. (WFM).

Albertsons reported loss during its recent fiscal year earnings release

While Albertsons is gearing up for its IPO and expectations are high, the grocer reported full fiscal year results on June 30^th, which showed a pro forma loss of $358 million, and revenue did come in at $57.9 billion.  Last fiscal year, Albertsons reported a loss of $330 million on revenue of $57.5 billion. As you can determine, losses at Albertsons accelerated from last year’s fiscal reporting to this year’s fiscal reporting.  Meanwhile, revenue did increase, but only very minimally. Compare that with Kroger’s impressive quarterly earnings release from August 15, 2015, in which Kroger reported profit increased to $1.05 billion on revenue of $58.59 billion.  During the same quarter last year, Kroger reported profit of $848 million on revenue of $58.27 billion.  As you can see, Kroger has been successful over the past year by increasing earnings and revenue.  However, to be fair, Kroger was not closing a massive merger like Albertsons was conducting with Safeway.

In the end, Cerberus Capital Management and other equity supporters of the IPO maintain that there is a lot of unlocked value in Albertsons due to the massive merger with Safeway that may take time to show itself, but the sponsors are confident of the long term for Albertsons.  With a presence in 33 states and over 2,200 stores in their portfolio, Albertsons absolutely will be a force for its competitors to deal with.