Albertsons LLC - Background

Background

Albertson's LLC is one of the successor companies to Albertsons, Inc. Albertsons was founded by Joe Albertson in 1939 in Boise, Idaho, USA. The store was filled with perks that, at the time, were brand new: free parking, a money-back guarantee, even an ice cream shop. The store was located at 16th and State Streets in downtown Boise. Over the next 60 years, Albertsons grew from a single store in Idaho to a chain of nearly 1,000 stores in a far-flung territory covering 23 states from coast to coast. Throughout its history, most of the company's growth had been piecemeal, opening new stores in established markets and moving into adjacent markets as opportunities presented themselves. In the late 1990s, Albertsons, Inc. changed direction, embarking on a series of acquisitions culminating with the purchase of American Stores in 1999. With that acquisition, Albertsons briefly became the largest American supermarket chain, with over 2,500 stores in 40 states.

The supermarkets acquired by Albertsons, Inc. in the 1990s and 2000s included Buttrey Foods in Montana, Wyoming, and North Dakota, Lucky Stores in California, Nevada, and New Mexico, Jewel-Osco stores in Illinois, Indiana, Iowa, and Wisconsin, Acme Markets in Pennsylvania, Maryland, New Jersey, and Delaware, Seessel's in Tennessee, Mississippi, and Arkansas, and Shaw's and Star Markets in New England, among others. In addition, the American Stores acquisition put Albertsons in the stand-alone drug store business for the first time, with its Osco and Sav-on Drug stores.

The acquisition spree caused significant problems for Albertsons, Inc. Many of the acquired chains had systems that did not mesh well with Albertsons. Financing those acquisitions required Albertsons Inc. to take on significant debt. Added to those problems were significant changes in consumer buying patterns, including new competition from large discounters such as Walmart and Costco that impacted sales. After several reorganizations and waves of store closings, on January 23, 2006, Albertsons, Inc., agreed to be acquired by SuperValu, a Cerberus-led group of investors, and CVS Pharmacy. The acquisition was completed on June 2, 2006 with the Cerberus-led group (who also included Kimco Realty Corporation, Schottenstein Stores Corp., Lubert-Adler Partners, and Klaff Realty) acquiring 661 stores and the distribution centers and offices from five of Albertsons divisions. These five divisions were thought to be Albertsons' five weakest divisions, and conventional wisdom in the industry was that the stores would eventually be closed or sold to other operators.