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Report: Albertsons considers takeover bid for Whole Foods


Highlights

Whole Foods’ shares jumped more than 4 percent in afternoon trading.

Albertsons pulled out of Austin about a decade ago, but recently re-entered the market.

Supermarket chain Albertsons is exploring a possible takeover of Austin-based Whole Foods Market, the Financial Times is reporting, citing unnamed sources.

Albertsons, which operates about 2,200 stores, is controlled by buyout group Cerberus Capital Management. Cerberus has had preliminary talks with bankers about making a bid for Whole Foods, the Financial Times reported, citing a person close to the buyout firm. No formal bid has yet been made, according to two people briefed on the situation, the Financial Times reported.

Albertsons pulled out of Austin about a decade ago, but recently re-entered the market via its acquisition of Safeway, the owner of Randalls.

Whole Foods’ shares jumped more than 4 percent in afternoon trading following the Financial Times report. The share price ended the day up 75 cents, or 2.1 percent, at $36.46.

A Whole Foods spokeswoman on Monday told the American-Statesman the company had no comment on the report.

The reported interest from Albertsons comes about two weeks after investment group Jana Partners revealed it had built a 9 percent stake in Whole Foods and raised the possibility of either a management shakeup or even a sale for the company. Whole Foods has a current market value of about $11 billion.

Jana Partners’ other demands for Whole Foods included “addressing core operating deficiencies in areas including customer loyalty and analytics”; “improving in-store execution, including labor scheduling and management”; “evaluating opportunities to re-engineer the issuer’s suboptimal and cost-disadvantaged grocery procurement and distribution strategy, such as by internalizing distribution or pursuing other hybrid strategies”; and “initiating a review of strategic alternatives particularly in light of the issuer’s apparent unwillingness to engage in discussions with third parties regarding such alternatives.”

A number of factors, including intensified competition, have hit Whole Foods hard, leading to struggles in recent quarters. A March report from a Barclays analyst, for instance, suggested Whole Foods had lost 14 million customers since 2015 — many of them to Kroger, which has stepped up its organic offerings.

Kroger has also been rumored to be interested in Whole Foods, according to published reports. So has Florida-based supermarket chain Publix.

Online retail giant Amazon last year considered making a takeover bid for Whole Foods as a way to boost its grocery operation, but decided not to pursue a deal, Bloomberg news service reported last week.

Founded in Austin in 1978, Whole Foods has 462 stores worldwide and 87,000 employees. In its fiscal first quarter, Whole Foods recorded record sales of $4.9 billion, but saw its net income decline and also lowered its earnings projections for the year.



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