By Tonya Garcia, MarketWatch
Convertible preferred stock could impact the price of common stock and will rank higher than common stock on issues of dividend payments and other matters, Albertson says in its prospectus.
Here are five other things to know about Albertsons as it prepares to go public:
It has a lot of debt
“We have a significant amount of indebtedness,” says the prospectus.
As of February 29, the company had about $8.2 billion in outstanding debt, and $667 million in finance lease obligations, according to the prospectus. Its interest costs came to $698 million in fiscal 2019, down from $830.8 million in fiscal 2018.
The company’s sponsors will continue to call the shots
After the IPO, Albertsons will be a controlled company. Cerberus will own 31.9% of the common stock, Kimco will own 8%, and the remaining sponsors, Klaff Realty, Lubert-Adler and Schottenstein, 11.7% each. Sponsors will own 73% if underwriters exercise their option to purchase shares in full.
“Our Sponsors control us and will continue to be able to control the election of our directors, determine our corporate and management policies and determine, without the consent of our other stockholders, the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales and other significant corporate transactions,” the prospectus says.
“As a result, our stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.”
Cerberus will be able to appoint four directors to the board if it owns at least 20% of the shares.
Technology is expected to be a key growth driver
During the coronavirus pandemic, many customers who had never tried purchasing groceries online did so in an effort to avoid stores and social distance. Data provided by eMarketer indicates that 68% of new e-commerce grocery shoppers would continue to purchase food online.
Albertsons talks up its curbside pickup capabilities, now available at 650 locations with a total of 1,600 planned in the next two years. Home delivery is available in 2,000 stores with help from Instacart and other third-party services.
The company is using technology to increase efficiency at stores and distribution centers, which it says is improving customer service. Albertsons has also started installing “micro-fulfillment centers” in its stores to help with delivery and online orders. Two have been installed with 10 more coming in the next two years.
The “just for U” loyalty program reached 20.7 million households in fiscal 2019, and uses the Albertsons mobile app for promotional deals, e-commerce and more.
Four of Albertsons private-label brands have sales of more than $1 billion a year
Those brands are Lucerne, Signature Select, which the company calls “ultra premium,” Signature Café and O Organics. Target Corp. /zigman2/quotes/207799045/composite TGT +0.38% , which has a number of private label brands across food, clothing, home décor and more, also has private-labels that exceed the $1 billion threshold.
Other private labels include Value Corner, “a cost-conscious” brand, and Debi Lilly Design, a home décor and gifts brand.
Albertsons says its Own Brands have 25.4% penetration. Its goal is to reach 30%.
Health care consolidation could mean price pressure
“If this consolidation trend continues, it could give the resulting enterprises even greater bargaining power, which may lead to further pressure on the prices for our pharmacy products and services,” the prospectus says.
“If these pressures result in reductions in our prices, we will become less profitable unless we are able to achieve corresponding reductions in costs or develop profitable new revenue streams.”
Albertsons operates 1,726 pharmacies.
Additional reporting by Claudia Assis.