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Publix thinks premium price worth it for Albertsons

By Mark Albright, Times Staff Writer
In print: Friday, August 8, 2008

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Publix Super Markets Inc. agreed to pay top dollar — more than $10-million per store — for about half the remaining Albertsons outlets in Florida, according to an SEC filing.

By agreeing to fork out about $500-million for 49 Albertsons locations, the Lakeland grocer is helping Albertsons owners at Cerberus Capital Management get back almost half the $1.1-billion they paid for 655 Albertsons stores two years ago.

Publix's $500-million acquisition is expected to be completed Sept. 9. Then Publix will start renovations that could take anywhere from a few weeks to 18 months, depending on the condition of the store. Publix plans to reopen all of them as well as virtually all of a dozen duplicate Tampa Bay Publix locations that are as close as across the street.

When the dust settles, the Publix store count would increase in the bay area from 96 to about 118 by the end of 2009, including new and replacement stores already in the pipeline.

Publix, which hopes to add most of Albertsons' 8 percent share of the Tampa Bay retail food market to its current 38 percent share, thinks the premium price is worth it. Publix has used a similar saturation strategy in South Florida, where it now holds more than 60 percent of the market.

"We are always looking for top locations that make us more convenient to our customers," said Maria Brous, Publix spokeswoman. "A lot of negotiation went into this deal."

Publix plans to complete the purchase without taking on debt or slowing its own $352-million annual new store and remodeling effort.

Publix paid a premium partly because, unlike most grocers who lease their stores, Albertsons owns the real estate. But even by that measure Publix paid more to avoid leaving enough good spots on the market to create instant or increased access to the Florida grocery market for big national rivals like Kroger Co., Safeway Inc. or Wal-Mart.

"That's about twice what I expected," said Patrick Berman, who heads the retail practice at Cushman & Wakefield in Tampa. "For $10-million they could buy the real estate and build a new store from the ground up."

Cerberus, a private equity firm that also controls Chrysler, has closed or sold about half of its Albertsons stores in other states since the 2006 purchase. That includes 132 stores in Northern California, 23 in Oklahoma and a warehouse in Fort Worth, Texas. Prices and terms were not disclosed. There will be 44 Albertsons left operating in Florida after the sale to Publix.

Mark Albright can be reached at albright@sptimes.com or 727-893-8252.