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US supermarket chain Albertsons is going public in the upcoming weeks. Private equity firm Cerberus Capital Management—Albertsons’ majority owner—estimated the chain's value at $24B (including debt). The fact that Cerberus is insistent on moving ahead on the IPO despite the market’s volatility, however, is raising concerns over the firm’s confidence.
Some believe that Cerberus is capitalizing on the strong performance of Kroger, using the competitor as a reference for pricing. Good thing too, since Kroger announced last week that earnings beat both profit and same-store sales expectations, with an earnings per share of 44 cents and a same-store sales growth of 5.3%. According to Reuters data, Kroger is trading at approximately 8.23 times the projected 12-month earnings (before interest, tax, depreciation and amortization, of course).
With its numerous stores (more than 2,200 supermarkets, including 1,247 Safeway stores), acquisition potential and large grocery market share, Albertson does have some appeal to investors. But the chain is also locked in a legal battle with recently bankrupted West Coast Chain Haggen, which is accusing Albertsons of misrepresenting the financial status of 146 stores that Albertsons sold to Haggens after Albertsons' $9.2B January Safeway merger. [BI]
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