IPO

Albertsons Proceeds With Pared-Down $800M IPO

Albertson's, the second-largest grocery chain in the United States, has priced its initial public offering (IPO) at a downsized $800 million, after numerous attempts of owner Cerberus Capital Management to cash out, Reuters said.

Cerberus had discussions with numerous shareholders which led to the downsizing, and Cerberus reportedly threatened to walk out at the last minute as it did in 2015 during one of the previous times the company tried to go public.

The pandemic has been a boon for Albertson’s, though, particularly in its early stages in March as everyone engaged in a spate of panic-buying to stock up in preparation for the quarantine. The company saw a 34 percent spike in sales at that time.

The lower IPO price could mean that the demand for more listings is decreasing and investor skepticism is still at play, likely due to the rising number of coronavirus cases in the U.S. over the past week. Rival grocery chain Kroger recently said it had also been seeing a decline in the demand that had buoyed it early in the pandemic.

Cerberus, an investor in Albertson’s since 2006, began to try taking the company public in 2015. The idea faced hesitation from other shareholders due to the company’s meager growth, and shareholders of the pharmacy chain Rite Aid Group, which Albertson’s tried to acquire, didn’t go for the idea either.

Albertson’s said it sold IPO shares at $16 a piece, down from the target range of $18 to $20 it had wanted. The number of shares sold was also dropped from 65.8 million to 50 million. The company is valued around $9.3 billion because of this, not counting the $8.5 billion debt from the end of February, Reuters reported.

The company initially wanted to catch as much as $1.51 billion for the IPO, with underwriters BofA Securities, Goldman Sachs, J.P. Morgan and Citigroup having the option to buy 9.9 million extra shares.

In the wake of the coronavirus pandemic, grocery stores will likely have to examine new digital options like delivery to stay relevant, particularly so long as people are worried about the coronavirus, PYMNTS reported. A survey found that 63 percent of grocery retailers were looking at increasing their spending in 2020.

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