Shares of Albertsons Inc. tumbled 12% on Friday, a day after the grocery chain abandoned talks to sell the company.
Negotiations with a group of investors including Supervalu Inc. and CVS Corp. collapsed because "we did not get a bid we could accept," Albertsons spokeswoman Shannon Bennett said late Thursday.
The company said it remained in discussions about selling some assets.
Albertsons is losing market share to Wal-Mart Stores Inc. and other lower-cost competitors. It may sell underperforming stores to improve profit at the company's remaining operations.
"The shareholders are giving this a huge Bronx cheer," said David Dietze, president of Point View Financial Services.
Shares of Boise, Idaho-based Albertsons dropped $2.74 to $20.54, falling below the price the stock was trading at before the company put itself up for sale Sept. 2.
"We will no longer be focusing on the sale of the company," Albertsons Chief Executive Lawrence Johnston told the Idaho Statesman newspaper. "We plan to continue to grow our profitable grocery business, create a more compelling shopping experience and grow our free-standing drugstore business."
JPMorgan Chase & Co. analyst Stephen Chick downgraded the stock to "underweight" from "neutral," and BB&T Capital analyst Andrew Wolf cut his rating to "hold" from "buy."
According to published reports, the bidders made a $26-a-share, $9.6-billion takeover offer for the company, but the bid was rejected by the Albertsons board.
"I think they are just middling on price and they will end up with a dollar more and it will get done in a week," said Gary Giblen, head of research at Brean Murray & Co. in New York. "I don't think they have any intention of doing anything but trying to shake more money out of the consortium. This is just a colossal negotiating ploy."
The deal may have been hampered by antitrust issues, with some of Supervalu's stores overlapping with Albertsons' in certain markets, the Wall Street Journal reported. The two sides were debating who would accept the risk if the antitrust authorities were to alter or scuttle the deal.