Acme owner cuts wages
The real estate and buyout investors who control Acme
Markets and other supermarket chains in 34 states are putting their enterprise
up for a stock sale, hoping to sell up to $1.5 billion worth of shares at $20
each, according to a Thursday filing with the Securities and Exchange
Commission.
Albertsons Companies Inc., the Idaho-based owner of 2,200
supermarkets including Safeway stores, has boosted sales and hired an extra
40,000 workers since the coronavirus restaurant shutdowns sent Americans
rushing into grocery stores. Albertsons now employs about 300,000 workers,
serving 33 million customers a week, the company says.
Even as the investors prepared to sell off just part of the
firm — about a sixth — for 15 times their cash payment seven years ago, they
also told the SEC they are cutting the pay of their workers. The firm said it
reduced the hourly wage by $4 on Saturday, reversing recent increases.
The Albertsons chains had boosted pay by $2 an hour March 15
as coronavirus warnings unnerved employees. The chains added another $2 just
for this week, giving employees a small bump for a week before pay falls to
pre-pandemic levels.
Many of its workers are paid minimum wage, or a few dollars
an hour extra in low minimum wage states such as Pennsylvania, where many Acme
employees are represented by the United Food and Commercial Workers union.
Pennsylvania’s minimum wage is now set to the federally imposed floor of $7.25
an hour but is to go up to $8 on July 1.
The company also plans to start giving shareholders $228
million a year in quarterly dividends, double the cost of its current dividend
program, according to its SEC filing.
That is a big chunk of Albertsons’ profits. Net income
totaled $466 million last year, after taxes and dividends, on $62.5 billion in
sales, according to the SEC filing. That’s a 0.7% return.
Chief executive Vivek Sankaran, hired last year from
PepsiCo, has said he hopes to cut future expenses and boost profits by
increasing online ordering and pickup and the use of self-checkout lanes. He
also wants to improve shipping and storage. All of this would allow the company
to employ fewer people.
Sankaran collected $29 million in salary, bonuses, and stock
awards last year. He owns stock worth $38 million at the price set for the
initial public offering..
He will not be selling shares as part of the IPO. But other
significant owners, led by former Chrysler Corp. owner Cerberus Capital
Management, will be unloading about 16% of their shares in the IPO. These
sellers include Philadelphia-based Lubert-Adler Real Estate Funds, cofounded by
former Penn State board chairman and Valley Forge Casino owner Ira Lubert,
which invests for the Pennsylvania state workers’ and teachers’ pension plans
(SERS and PSERS), and other clients.
The rest of the business will still be owned by those firms
and by a group of smaller investors, including company executives and
directors.
Cerberus, Albertsons’s largest investor, hopes to sell 28
million shares, worth $560 million, in the IPO. Lubert-Adler, Schottenstein
Stores Corp., and Klaff Realty LP each hope to sell 10.4 million shares, worth
$208 million each. Smaller investors also plan to sell some shares.
The four large firms will remain Albertsons’s largest
owners. Their IPO price suggests they set the value of the entire concern at
about $10 billion.
The investors will keep all the IPO proceeds, leaving
nothing for the supermarkets. Albertsons has around $400 million in cash on
hand, and net debt totaling around $7 billion, though that has fallen about $3
billion since 2017.
These owners bought Acme and several larger store chains
from Supervalu Inc. in 2013 for $100 million in cash and assumed its $3.2
billion in debt.
It currently operates 50 supermarkets in Pennsylvania, 73 in
New Jersey, and 50 in Delaware.
The sale, led by Bank of America, Goldman Sachs, and other
Wall Street investment banks, marks the third attempt the owners have made in
five years to sell shares to the public. No date for the sale was announced.
In 2015 and 2017, Albertsons delayed plans for an IPO as it
variously faced heightened competition from industry leader Walmart and from
Amazon’s fast-growing home delivery service.
Investors had speculated Albertsons might again cancel its
IPO plans in the face of investor indifference after the stock market fell
sharply in March as restaurants, hotels, and other employers laid off more than
20 million Americans due to coronavirus shutdowns.
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