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Albertsons Said to Get Bid From Kroger

The grocer's drugstore unit, meanwhile, has attracted three offers, according to sources.

October 22, 2005|From Times Staff and Wire Reports

Albertsons Inc. has received a preliminary takeover bid from larger grocery store rival Kroger Co., while its drugstore unit has attracted bids from three pharmacy chains, sources familiar with the situation told Reuters on Friday.

Albertsons put itself up for sale in September after struggling against competition from discounters such as Wal-Mart Stores Inc. In addition to its namesake grocery stores, Albertsons owns other supermarkets, including Acme and Shaws, as well as the Osco Drug and Sav-on Drugs chains.

Despite its competitive struggles, Albertsons, as a whole, could fetch more than $10 billion, plus the assumption of $6.5 billion of debt, analysts said. It was unclear what the drugstore chain would be worth on its own.

"We are somewhat surprised by these numbers but recognize that Albertsons does own some valuable assets, including real estate and the chain's drugstore assets," Prudential Equity Group analysts said in a research report.

Kroger, owner of the Ralphs supermarket chain, submitted a takeover offer for the entire company, competing against several teams of private equity firms, sources told Reuters.

CVS Corp., Walgreen Co. and Rite Aid Corp. bid on the drugstore chains, the sources said.

Shares of Albertsons, the No. 2 U.S. grocery store firm behind Kroger, rose $1.29, or 5.7%, to $24.06 on Friday on media reports that bidders had submitted preliminary offers for the company. Goldman Sachs and Blackstone Group are running the auction.

A combination of Kroger and Albertsons would face intense regulatory scrutiny because of their dominant share in markets such as Southern California, analysts said. As a result, they said, the companies would be forced to divest some assets or chains that could be snatched up by smaller rivals looking to bulk up in specific markets.

Citing likely antitrust complications, one observer close to the supermarket industry said it was possible that Kroger was more interested in taking advantage of the rare opportunity to have a close look at Albertsons, one of its biggest competitors.

Separately, Rick Icaza, president of United Food and Commercial Workers Local 770 in Southern California, said he was unaware of any formal bid submitted by Kroger.

"We've heard lots of rumors, but there's been nothing concrete," said Icaza, whose parent union was pitted in a 4 1/2 -month strike and lockout against Albertsons, Kroger and Safeway Inc. in late 2003 and early 2004.

CVS, Walgreen and Rite Aid declined to comment. Albertsons, Kroger and Safeway could not be reached for comment.

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