Restructured Cerberus Deal For Supervalu Still On Track
Despite some recent setbacks, the Cerberus-Supervalu potential marriage is still very much on, several Wall Street sources have told me.
While we had heard predictions that a deal between the struggling retailer/wholesaler and the well-endowed New York venture capital firm might happen before Thanksgiving, it now looks like it will be early January before there’s a possible announcement. And we’ve learned that such a deal will take a slightly different form than originally anticipated.
Instead of Cerberus acquiring all the assets of the Eden Prairie, MN organization, it now appears (according to several sources) that Cerberus will acquire the Albertsons stores in its Southern California (226 units in California and Nevada) and Intermountain divisions (187 units in Oregon, Washington, Wyoming, Montana, Utah, North Dakota and Idaho). Those units would then be rolled into Albertsons LLC, which Cerberus has controlled since the 2006 sell-off of the entire Albertsons organization by then CEO Larry “The Milkman” Johnston.
Boise, ID (the home of the original Albertsons) will remain headquarters for Albertsons Markets LLC. We’re told that Bob Miller, CEO, will become chairman of the new organization and Bob Butler, currently executive VP-operations, will assume the chief executive post. If a deal for Supervalu’s Albertsons banner is concluded, Albertson Markets LLC will add 213 units to its current base of 192 stores that are located in Texas, Arizona, Florida, New Mexico, Louisiana, Arkansas and Colorado.
The change in direction is a result of how Cerberus now plans to deal with the remainder of Supervalu. We’re told that instead of a total asset sale, Cerberus would now own a substantial, but minority stake in SVU (think 25-40 percent).
The common link in all of this is Bob Miller, who originally worked for Joe Albertson in the 1960s and subsequently held senior management positions with Fred Meyer (with Ron Burkle’s Yucaipa Cos.), Wild Oats and Rite Aid, before returning to head the Albertsons bannered stores that Supervalu did not acquire in that historic 2006 deal.
We’re told that Miller would likely become chairman of Supervalu (therefore having a Cerberus link in both organizations). Sam Duncan, who like Bob Butler, worked with Miller at Fred Meyer, would become CEO of Supervalu.
If such a deal does occur, Cerberus likely will get at least three SVU board seats, too. While this structure is different than the reported original plan, it still would give Cerberus the control it needs to make future moves.
And why did the original “total asset” acquisition plan fail?
We were told that Cerberus wanted to borrow money for the whole deal without putting up any of its own capital.
As one of our Wall Street insiders said: “Yes, even today with money being ‘cheap’ and a highly successful multi-billion dollar investment firm ready to acquire a troubled company – albeit one with many fixed assets – the banks made it clear that you must have some your own skin in the game. Apparently, Cerberus didn’t want to even put up the ante.”
So, if a deal does occur, priority number one is reportedly selling Acme, Shaw’s and Jewel. The potential Jewel play is somewhat surprising news, given that banner’s still dominant position in Chicago. However, one source told us to look past the Jewel’s past reputation and focus on current and future events.
“The possible sale of Jewel by Supervalu or Cerberus shouldn’t be that hard to believe. The deep dive may not have started as early as at Shaw’s or Acme, but for the past several years, overall sales have diminished sharply and ID sales continue to be awful. The Jewel situation is a microcosm of what’s been wrong with Supervalu for the past five years – aging, smaller stores, no significant cap-ex to improve infrastructure or real estate, vanilla marketing, out of touch pricing – although that has improved somewhat over the past several months – and poor corporate leadership. And then when you consider the new competition entering Chicagoland – Wal-Mart, Meijer, Roundy’s, etc. – it might be time to consider getting out of the market,” said our industry insider.
It would seem logical that Supervalu/Cerberus would like to find one buyer for all three troubled banners, but that might not be so easy, especially if the potential new organization is looking for a quick dump.
Viewing those individual banners, Kroger – which has the capital do such a deal, is already unionized and has a void in its nearly national grid in Chicago- would be a logical contender for Jewel.
As for Shaw’s and Acme, perhaps Ron Burkle could cobble together a deal on the cheap for those distressed properties, but even Yucaipa would have store overlap problems in parts of New Jersey, Pennsylvania and Delaware. Of course, there’s always the auction or block sales process, which would yield fewer stores being sold, but likely a higher premium to be gained on a per unit basis.
We’re also told that, while Eden Prairie will still be Supervalu’s headquarters, there will be a lot less emphasis on “centralization.” Miller, one of the toughest and smartest supermarket executives of the past 25 years, knows that giving increased power and control back to the divisions will only make them stronger and potentially more viable a for sale down the road.
However, in my opinion, while reverting back to a decentralized mode is an excellent idea, you’ve got to wonder if too much damage has already been done for a successful resurrection.
As for Save-a-Lot, two of our sources told us that at this point (and contrary to other published reports), the extreme discount division is not for sale immediately, but – at the right price – could be moved.
That leaves Supervalu’s independent wholesale unit and its vast distribution and logistics network. I’m told that both of those pieces are running fine and we should expect the status quo to continue.
So, in essence, if our sources are correct, Supervalu will revert back to nearly the same model it had before its disastrous decision to overpay for the “crown jewels of Albertsons.”
What have you wrought Jeff Noddle?
Schlicker Deserving Of First Ballot Hall Of Fame Induction
It is with bittersweet feelings that I write my thoughts about the soon-to-be retiring Carl Schlicker, COO of Ahold USA.
The bitter: the grocery industry, which continues to be plagued by an overdose of process, is losing one of its best talents of the past 25 years – a man not only possessed with a great depth of knowledge and insight, but a leader who has always been sensitive to the needs of his people and loyalty to his company. That’s a very rare combination today.
The sweet: the satisfaction of knowing that Carl, 61, gave it his all in a career that will span nearly 40 years when he steps down as Ahold’s top man in the U.S. in February. As he told me, “Physically I can still do it, but mentally it’s become more demanding.” There is also sweetness in the time that he wants to spend with his family (children and grandchildren) and especially his wife, Sue, who he readily admits, sacrificed a lot because of the demands of Carl’s many and varied roles at Ahold USA. “Yes, she sacrificed a lot,” Schlicker noted, “but she contributed a lot more. Without her, my success would not have happened.”
I’ve written many columns in my nearly 40 years in the biz about people I’ve admired (and a few about people I didn’t), but my level of my appreciation of Carl as a business leader and as mensch ranks him among the finest people of my generation.
In the late 1990s, when he came to Giant/Carlisle to oversee store operations as part of Tony Schiano’s great team that followed him from Edwards in Windsor Locks, CT, Schlicker was often referred to as “Jersey Carl.” His tough guy reputation might have been aided by the fact that the former Marine was born in the Garden State (Elizabeth) and his father was a police officer, but store managers and DMs told us that, while Schlicker was fair, he was also demanding, and at times, contentious.
At his next stop at Giant as executive VP-sales and merchandising, suppliers and brokers also spoke of Schlicker’s fairness, adding that he was always prepared and very aggressive. However, several made it a point to note that if you didn’t deliver on what you promised, a trip to the woodshed was not unheard of.
The truth is, Carl never lost that edge; that drive and frankness are two of his best assets, but he learned to temper it.
I watched that external mellowing evolve over the past 10 years, but especially so after he was named CEO of Giant/Carlisle in 2007 and a year later when he moved to a bigger stage as chief executive of Stop & Shop and Giant/Landover.
In late 2009, when Schlicker was selected to head Ahold USA’s major restructuring effort it represented, in my opinion, an affirmation that the “everyman” in all of us could be duly recognized. Sure, Ahold could have easily chosen a better educated, more polished and more experienced executive to lead its most important project in the U.S. (which it entered in 1979), but wise men like Larry Benjamin (formerly Ahold’s top man in the U.S.) and former CEO John Rishton realized that promoting a team player who understood Ahold USA’s culture and chemistry would be a winning proposition.
And with a project as daunting and complex as AholdUSA’s corporate restructuring, the leadership abilities and immense skill package of Schlicker’s really shone. As the unit struggled with meeting timelines and occasionally with execution, Schlicker was at his best during that challenging period. He was upbeat with his team, encouraging them to think positively about what the end results would bring. His communication skills were excellent. And even though certain areas like digital marketing and enhanced technology weren’t instinctive for him, he believed in taking risks that would not only maintain Ahold’s dominant position in the Northeast, but would improve it by differentiating the Ahold USA banners from its competitors.
Today, I rarely hear any “Jersey Carl” stories anymore; Carl Schlicker has become a delegator and a great listener. While some observers might think he “bleeds” Ahold,” I don’t think that’s the case at all, despite his tenacious loyalty. Carl “bleeds” for his people, that’s how much he cares for and admires them.
As long as I’ve known Carl, on a personal level, he really hasn’t changed that much. Yes, he’s opinionated (that’s a good thing), he’s got a great sense of humor (and a self-deprecating one at times) and he’s a lot of fun to hang with. Plus, his BS-O-Meter is arguably the best in the entire grocery business (he’s so intuitive and quick, like a baseball speed gun that reads “curve ball, 85 miles per hour”).
Those who are fortunate enough to know Carl personally and professionally really comprehend what makes him successful – there’s no hypocrisy, no “double speak,” no spin and very little politicking. If you like your coffee very sweet, Carl’s not your man. And if you’re cup is always half empty, you’ve also come to the wrong café.
In the two weeks since Carl announced that he was stepping down, I’ve talked to at least 30 Ahold USA associates (from corporate to the divisional headquarters to the stores). Unanimously, their admiration for him is very strong, but there’s a bit of sadness, too.
They know, like I do, that leaders like Carl Schlicker are rare commodities and are almost impossible to replace. I’m proud to say that he’s been a difference maker and will always be a friend.
‘Round The Trade
Now that Tesco has announced it will pull the plug on its failed Fresh & Easy experiment, it should be interesting to see who picks up the pieces. The Fresh & Easy story is really a simple one to recap: haughty, arrogant British retailer thinks it can build a better mousetrap (based on its overall corporate success in the UK) only to find that its flawed research led to an instant disconnect with U.S. consumers in California, Arizona and Nevada. Between Marks & Spencer, Sainsbury and now Tesco, perhaps the Brits would be better served choosing another country for expansion. As for those “pieces” (stores), if Wal-Mart is ever going to do more than “talk the talk” about expanding its small format operation, the opportunity to acquire the entire 200 store Fresh & Easy operation is staring them squarely in the eye. And speaking of the Behemoth, Wal-Mart announced that net income in its third quarter, ended October 31, increased 9 percent to $3.63 billion and comp store revenue at its U.S. store gained 1.5 percent, its fifth consecutive quarter of comp sales gains. Overall sales at its U.S stores rose 3.6 percent to $66.1 billion (total company sales in its third quarter excluding membership fees from Sam’s Club were $113.2 billion). However, Wal-Mart maintained its cautious stance in the fourth quarter and going forward. “Current macroeconomic conditions continue to pressure our customers,” asserted Charles Holley, the mega-retailer’s CFO. “The holiday season is predicted to be very competitive but we are prepared to deliver on the value and low prices our customers expect.”…in what seems like late inning housekeeping moves comes word that Supervalu has frozen salaries. That message came in an internal email sent from executive VP- human resources and communications Dave Pylipow which states in part: there will be no 2013 merit pay increases for salaried team members. Additionally hourly team members in SVU’s corporate, banner, region and distribution center offices will not receive a merit pay increase. This does not impact store hourly or store pharmacy positions, or hourly operational distribution center roles. Promotions and job changes will continue to be recognized with pay changes where appropriate. Subject to any applicable laws, the frequency at which some team members are paid will change in early 2013. Today, all team members are paid on a weekly basis. Next year some salaried team members will transition to a bi-weekly pay schedule and others to a monthly schedule. Also, SVU’s service anniversary awards program as it exists today will be discontinued and as for salaried team members, as well as hourly team members in Supervalu’s corporate, banner, region and distribution center offices, the company’s matching contributions are being suspended. For store hourly and store pharmacy positions, as well as hourly operational distribution center roles, the company’s maximum matching contributions will be reduced from 5 to 3.5 percent. Pylipow added: “We recognize that these changes will have a significant impact on you, and we will continue to evaluate them in light of our business results. Thank you for your understanding and your work for the company in these critical times.” A sad situation for a company that must “divest itself from itself” ASAP…A&P (which in some surreal way finds itself in a slightly better position today than Supervalu) announced it will close three New Jersey Super Fresh stores on January 11 – Marlton, Plainsboro and Westmont – reducing the number of Super Fresh units to 22…other Ahold USA stuff: the company has agreed to build a 162,000 square foot meat processing facility in Lower Allen Township, PA (Cumberland County) that will produce beef and pork products for the chain’s Giant/Carlisle and Giant/Landover divisions. The big global retailer said it will invest at least $63 million in the project and will hire about 850 workers. Ahold has named Vantage Foods to operate the facility when it opens in late 2013. Vantage currently supplies the southern region of Martin’s Food Markets from a facility in Lenoir, NC. “Ahold USA is proud to be part of the economic engine of Central Pennsylvania, brining new jobs to the region and a new business, Vantage Foods, to the state. This meat packaging facility is a significant investment in the future and these incentives will help us ensure its long-term success,” said Mark McGowan, executive VP-supply chain for Ahold USA…I missed the opening on December 4, but did have a chance to visit the new Kroger marketplace store which debuted in Chesterfield County (at the site of the old Cloverleaf Mall). Wow! What a store. The new 123,600 square foot unit offers more than 300,000 items including furniture, jewelry and home fashion and décor. The food presentation, particularly its fresh departments, was magnificent. Kroger, which recently highlighted its aggressive expansion plans in the Tidewater market, will open a 124,000 square foot Marketplace at the old SuperK location on Holland Road in Virginia Beach next year and will cut the ribbon on its second Richmond area (Staple Mills & Hungary Road) Marketplace in 2014 and according to company officials will have a minimum of 10 marketplaces by 2017. While the new Marketplace mega-store definitely gets my vote as store of the month, I have to give my friends at McKay’s first place in a new category: “niche” store of the month. McKay’s totally retrofitted its Hollywood, MD location with a strong perishables and prepared foods look. A beautiful, smallish (17,000 square foot) unit from its wine bar to “food station” presentation. David, Tommy, Betty, Cherry and mom Marilyn should be very proud.
Local Notes
Big shakeup at Landover, MD-based UFCW Local 400, the largest local labor union in the country for clerks and meatcutters. Tom P. McNutt, who has served as president of Local 400 since May 2010 (following the retirement of Jim Lowthers), has resigned to accept a position with the UFCW International in Washington. Former secretary-treasurer of Local 400, Mark Federici, assumes the top post at Local 400. Federici issued the following statement: “I look forward to building on the strong foundation President McNutt leaves behind. As the Local union’s leadership changes hands, the entire staff and I will continue to work towards our primary goal of ensuring that the good wages and benefits of our members are protected and that our members receive the same high quality representation that the Local union has always provided.” McNutt’s father, Thomas R. McNutt, an iconic figure in the labor movement, served as president of Local 400 from 1976-1997…on December 9, Weis opened its new 65,800 square foot replacement unit in Fogelsville, PA (Lehigh County) and its first LEED (Leadership in Energy and Environmental Design) unit in its 162 store fleet… the Grocery Manufacturers Association (GMA) has named Danny Wegman, CEO of Wegmans Food Markets, and Tim Smucker, chairman of the J.M. Smucker Co., recipients of the 2012 GMA Hall of Achievement Award, the highest honor given by the national manufacturer trade group…a tip of the hat to Wakefern Food Corp. for another stellar year in continuing challenging market conditions. The Keasbey, NJ cooperative wholesaler posted $13.6 billion in retail sales (for the year ending September 29), an impressive 6.4 gain from 2011. Revenue from wholesale was $10.1 billion. That not only ranked Wakefern as the largest co-operative grocery wholesaler in the country (according to National Cooperative Bank), it moved it up one spot to number four among all co-ops nationally (CHS Inc, Dairy Farmers of America and Land O’ Lakes were the respective overall leaders). During the past 12 months, Wakefern opened 10 new ShopRite units and one new PriceRite discount store. Additionally, last month, a new PriceRite store debuted in Syracuse, NY, its first in that Central NY city and in also opened its second and third PriceRite units in Maryland (in Baltimore City on West Pratt Street and in District Heights). Both stores are off to very good starts… a post-storm update on Hurricane Sandy. Having witnessed some of the destruction caused by the most devastating weather event to his this region over the past 50 years, it is unbelievable to describe the toll it has taken on so many communities and people. However, as awful and heartbreaking as Sandy’s impact was, I’ve got to give props to many, many people who serve the food industry. The help that was provided and still continues from retailers, vendors and distributors was incredible and should never be forgotten. From cash donations in the tens of millions, to providing food, shelter and clothing to many unfortunate victims, the food industry shined its brightest light during the past few weeks. Those retailers and wholesalers that gave notable contributions, that I’m aware of include: Ahold USA’s whopping $2.5 million donation to the American Red Cross; CVS gave $100,000 to the Red Cross; C&S Wholesale contributed about 100,000 pounds of meals, water, snacks and cleaning products to Feeding America food banks in Connecticut and New York City; Target donated $500,000; Wakefern contributed up to $1 million in funds and in-kind donations; Walgreens’ charitable offering was $250,00; and Wal-Mart donated up to $1.5 million; Wawa gave $10,000 to the Community Food Bank of New Jersey and also to food banks in Monmouth and Ocean Counties; $100,000 was donated to the American Red Cross from Rite Aid; King Kullen and Bozzuto’s teamed up to donate $100,000 in supermarket gift cards to those in need; and Wegmans provided three truckloads of food worth approximately $200,000. Of course, there was much more donated from other retailers, wholesalers and countless manufacturers that I’m not even specifically aware of. In the end, it was all about reaching out to help others in need. As tragic as this episode was (and will continue to be), it makes me proud to be a member of one of the greatest industries in America…in the obit column, I’m very sad to report the death of one of the most influential jazz pianists of the past 50 years, Dave Brubeck. Brubeck, who died one day before his 92nd birthday earlier this month, recorded one of best selling jazz albums of all time “Time Out” (1959) which produced the crossover hit “Take Five.” However, the album’s first track “Blue Rondo a La Turk” is, in my opinion, the best song on the record – a tune that blends folk, jazz and a touch of Mozart…a big tip of the fedora to the Mid-Atlantic chapter of the Network of Executive Women, whose recent holiday mixer at Taberna Del Alabardero in DC was a big winner. The event was a throwback to days of yore, when networking and socializing (partying) were the order of the day. Plus, the audience got to hear Bob Bly and Micky Nye (Shoppers) and Shane Sampson and Anthony Hucker (Giant/Landover) talk about the importance of women in the grocery business. And an extra special shout out to Elda Devarie, president of EMD Sales, for choosing such a great restaurant and selecting the delicious Spanish wines. And finally, to all our readers and advertisers, may you have a happy, healthy, merry and wealthy holiday season!