Kroger Seeks Partners in Albertsons' Auction

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Kroger Seeks Partners in Albertsons' Auction

WASHINGTON -- Kroger is seeking to team with a group of private equity firms to bid on rival Albertsons Inc., sources told Reuters.

Kroger has approached buyout firms Bain Capital, Thomas H. Lee Partners and Warburg Pincus about a joint offer for Albertsons, having decided not to place a solo bid on the company, the sources said in the report.

Kroger's discussions with the buyout firms show that the company is still interested in getting part of Albertsons, which put itself up for sale in September after struggling amid competition from discounters such as Wal-Mart, Reuters reported.

Another consortium consisting of Kohlberg Kravis Roberts & Co., Texas Pacific Group and Apollo Management are also bidding, according to several sources close to the deal.

Final bids were due on Dec. 7, but that deadline was flexible, allowing proposals to trickle in throughout the week, sources told Reuters. A decision may take more than a week to reach since the offers were likely to take several forms, with some bidders wanting only the drugstore chain.

The drugstore units have nabbed bids from CVS Corp. and Walgreens, sources said in the report.

A third group made up of Cerberus Capital and Kimco Realty is also bidding, and has been joined by grocer SuperValu Inc., sources said.

Goldman Sachs and the Blackstone Group, the firms running the auction, are unlikely to accept bids below $25 a share, a source told Reuters. Analysts have predicted that the auction could bring in bids as high as $30 a share and said the total purchase price for Albertsons could top $16 billion including debt. But some doubt has surfaced on just how much the bidders were willing to pay for the struggling grocery chain, according to the report

The Bain and THLee group had started to lose interest in the auction due to its hefty price tag. But by teaming with Kroger, the buyout firms could spread out the cost and risk of such a large acquisition, according to Reuters.

Kroger has its eye on some Albertsons chains or markets, rather than the whole company, so teaming with a buyout group would give it a role in any reorganization without buying the company outright, Reuters reported. Albertsons' grocery stores include Shaw's, Acme and the company's namesake supermarkets.

To revive Albertsons, analysts expect private equity buyers to jettison some chains, close underperforming stores and sell the real estate to other retailers.

Kroger may ultimately join another bidding group or drop out of the auction as Albertsons reviews the latest set of bids.

Yucaipa Cos., the investment firm owned by billionaire grocery magnate Ron Burkle, has also eyed Albertsons. Earlier this year, Yucaipa bought Pathmark Stores Inc., which operates grocery stores in New York and the greater Philadelphia region, Reuters reported.