Cerberus in checkout line for $14bn payday
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Cerberus is close to bagging $14bn at the supermarket
In 2006, Cerberus Capital Management was mostly an afterthought in a mega buyout of the US grocery chain, Albertsons. Stephen Feinberg’s private equity firm picked up about 700 unwanted stores while the main Albertsons buyer, a Midwestern food wholesaler, Supervalu, took on more than 1,000.
That is if they can get the sale past authorities in Washington, DC as well as state capitals, who are naturally not excited about the supermarket business shrinking. Those opposed to the consolidation are putting up a spirited-fight, arguing that the deal will be bad for grocery prices, grocery workers and cities and towns across America.
It underscores how politics, for the private equity industry, has become as important a skill as financial engineering and operations.
As DD’s Antoine Gara and Sujeet Indap report in this feature, the key to Cerberus’ huge windfall is a set of real estate specialist investors. Starting with the 2005 transaction, the likes of Kimco, Lubert-Adler and Klaff, all of who are experts in “PropCos”, joined Cerberus in buying the unwanted Albertsons stores.
Eventually the group acquired the rest of Albertsons as well as the national chain Safeway. In between, Cerberus and friends sold properties and land, paid down debt, took some dividends and eventually listed Albertsons in 2020 with a $25bn enterprise value.
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This story originally appeared on: Financial Times - Author:Tax Cognition
