Albertsons’ management and its private equity backers have tabled their IPO plans again, Bloomberg reported, citing people familiar with the matter. The delay likely is the result of Albertsons' failed attempt to buy Whole Foods and a poor showing by Blue Apron of its own public offering, which is down 25% since it listed its stock two weeks ago.
Before Amazon’s $13.7 billion purchase of Whole Foods on June 16, Bloomberg reported Albertsons had been considering reviving its IPO plans and going public by the end of the year. If the company had pursued that route, it was planning to relaunch with a narrower price range and go straight to investors who showed interest in the deal in 2015, the sources said.
Negative same-store sales, slipping financials and challenges facing Kroger, one of its biggest competitors, prompted those close to the company to conclude they wouldn't get the value of $12.4 billion targeted two years ago when the company first tried returning to the public markets.
Cerberus Capital Management, which backs Albertsons, first invested in the industry back in 2006. The partnership has since grown the grocer through a series of deals, highlighted by the $9.2 billion purchase of Safeway three years ago.
This year alone, Albertsons has tried unsuccessfully to expand its presence in the organic and natural food space to place it in a position of growth to impress potential investors. First, it attempted to snap up Sprouts Farmers Market. Most recently, it offered to buy Whole Foods, but its offer was passed over for that of Amazon.
Albertsons is facing many of the same challenges as other grocers. These include shrinking margins, growing competition from discount stores like Lidl and Aldi, and diverse online competitors like food delivery company Instacart and meal kit preparer Blue Apron.
And then there is the Whole Foods and Amazon merger, which has shaved billions off of the market cap of grocers, CPG companies and almost any entity with a foothold in the food space. The blockbuster deal has cast further doubt on an already challenging atmosphere for Albertsons. There is uncertainty as to what the future might hold for the grocer, having to compete with an Amazon-Whole Foods juggernaut that many expect to dominate because of its combined valuable consumer data, expanded presence in food delivery, and dominance in fresh items like fruits and vegetables.
With this concern heaped upon prior reservations, it's no wonder that debt-laden Albertsons would struggle to woo investors. It's likely troubling news for Cerberus Capital Management, which may be eager to exit the business —and possibly report a profit.
Albertsons and its owners have little choice but to carry on and invest in store remodelings and online efforts just to remain competitive. Despite being in the hands of a private equity firm, the grocer has continued to report quarterly financials — most recently in mid-May when comparable store sales declined 0.4% — a sign the grocer hasn't given up hope of its returning to the public market once again. For Albertsons and Cerberus, they can always take stock in the old proverb: hope springs eternal.