(Bloomberg) — Albertsons Cos. jumped in late trading on Monday after the grocer said it would study “strategic alternatives” to boost growth.
The review will assess “various balance-sheet optimization and capital-return strategies, potential strategic or financial transactions” and other initiatives to complement its operations, Albertsons said in a statement. “Responding to inquiries” is also on the to-do list, and the retailer has hired Goldman Sachs Group Inc. and Credit Suisse Group AG as financial advisers.
The review opens the door to the potential sale of such “ancillary” Albertsons chains as Acme, Tom Thumb or Shaw’s, said Jennifer Bartashus, a retail analyst at Bloomberg Intelligence. While a takeover is also a possibility, any deal would face antitrust scrutiny. Pruning the portfolio would enable Albertsons to raise cash as it seeks to keep up with Walmart Inc., Target Corp. and Amazon.com Inc. by investing in digital offerings and delivery services.
“Usually you see these kinds of things as a potential divestiture to solidify the core base,” Bartashus said. “You optimize the balance sheet, you bring in a little bit of cash that you can invest in other priorities.”
The shares rose 8.9% to $31.75 in extended trading in New York. Albertsons fell 3.4% this year through the Monday close, while a Russell 1000 index of consumer-staples companies slipped less than 1%.
Albertsons scored significant sales gains during the first year of the pandemic, but growth has cooled since then while cost pressures from higher labor and logistics expenses have increased. The Boise, Idaho-based company also operates grocery chains such as Safeway, Jewel-Osco and Market Street, as well as the eponymous Albertsons stores.
The board hasn’t set a timetable and hasn’t made any decisions on actions it will take.
Albertsons emerged from Cerberus Capital Management’s portfolio when it held an initial public offering in 2020. The private equity firm still owns more than 30% of the grocer, according to data compiled by Bloomberg. New York-based Cerberus first invested in Albertsons in 2006 as part of a $17.4 billion acquisition alongside CS Corp. and Supervalu Inc. Neither of the other two entities remains an investor.
Cerberus didn’t immediately respond to a request for comment.
“The board believes that this review, coupled with an ongoing focus on accelerating our transformation strategy, will create enhanced value for all our stakeholders including our customers, associates, and investors,” Chan Galbato, co-chairman of the board, said in the statement. Galbato is also chief executive officer of Cerberus’s operations arm.
(Updates with analyst comment in third paragraph.)
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