February 22, 2007
Is Roundy’s for Sale?
Is it true? Is Roundy’s Supermarkets exploring the ever-popular strategic alternatives for its business, just a week after the chain announced it was getting ready to make its mark in the Chicagoland market?
A report in The Wall Street Journal said the chain has been doing so well that Willis Stein & Partners, the private equity firm that bought the company in 2002, is ready to cash in its investment.
As to be expected, a company spokesperson said Roundy’s “focus continues to be growing our company.”
Among the companies mentioned as possible suitors for Roundy’s in the Journal article were Supervalu, Giant Eagle and a number of other private-equity groups.
Discussion Questions: What do you see happening with Roundy’s? If it were sold, which company do you think would be the best fit to take it over?
BrainTrust
Recent Discussions
Discussion Questions
Poll
Roundy’s debt has been downgraded due to disastrous same store sales and the fact that they are facing an onslaught of new competition coming into the markets they operate. The same store sales issue is mostly due to Wal-Mart in the rural areas and cannibalization in the Milwaukee area. Minneapolis has been a struggle with Rainbow, however, I think those stores will be sold off separately, and at a nice profit. Remember, they bought them for pennies on the dollar in the Fleming bankruptcy sale.
Roundy’s biggest selling point is their 60%+ market share in Milwaukee. They have made multiple strategic acquisitions, just small enough to avoid FTC approval. That will soon change as Wal-Mart Supercenter, Woodman’s, Costco, Super Target, Whole Foods, Trader Joe’s, and others open more units attacking them at both ends. Roundy’s is probably worth more now and they will be at any time in the future. I’m sure they will sell while their Milwaukee market share is over 60% and not when it drops to 48%.
Most likely I see Roundy’s being sold to a company like Yucaipa who has a successful history working with Roundy’s management team. Whoever buys them must keep Bob Mariano on board so he can fulfill his destiny of returning to Chicago.
Will Roundy’s be sold? I think so. The potential sale comes despite the recent announcement of new initiatives including a major push into Chicago and the launch of 2500 private-label products over the next three years.
The Wall Street Journal has reported that the chain was doing “so well” that owners, Willis Stein & Partners, are ready to cash in. Meanwhile, Moody’s Investor Service downgraded its rating on Roundy’s last month from stable to negative after Roundy’s decision to acquire the Milwaukee-area Jewel-Osco stores. The Moody’s report also noted that Roundy’s comparable-store sales were negative and getting worse. Which’s the best weathervane?
Financial guys rarely want to put on a grocer’s apron for very long. These opportunistic gurus want to capitalize on the financial values at that great acquisitions school, Guru U.
I believe that it is the track record for this investment firm to cash out its profits in a similar timetable, so it likely will happen if they can find a good buyer. Mr. Mariano’s comments about entering the Chicago market come at an interesting time considering this development. With his track record and experience in Chicago, many will think that this is the beginning of a great opportunity for Roundy’s. There are undoubtedly others that will feel that breaking into the Chicago market is so difficult that it will be a major problem for Roundy’s. It will be very interesting to watch this unfold.
This is simply another in a string of smart business decisions by this team. Who should buy Roundy’s? Anyone who can, and who understands why this turnaround metamorphosis has been so successful. Who shouldn’t? Anyone who wants to flip it again. This is a business opportunity for the long haul now.
After sifting through the numbers, SVU paid about $12.4 billion for around 992 stores after the CVS and Savway spinoffs. Roughly $12.5 million per store.
Roundy’s would be $13 million per store or $14.4 million per store if you assign $100 million to the Rainbow problem and spread the remaining $1.9 billion over 132 Copp’s and PNS stores.
Good deal?
Before you decide, consider the Flemingesque appearance of SVU’s balance sheet.
Total stockholder equity at December 2, 2006 – $5,239,000,000
Total Goodwill at December 2, 2006 – $5,871,000,000
Intangibles, Net – $2,667,000,000
To summarize, SVU’s Goodwill and Intangibles, Net increased $6,830,000,000 to a total of $8,538,000,000 from the same quarter in the pre-acquisition year while Stockholder’s Equity increased $2,620,000,000 to $5,239,000,000 over the same period.
The Company has approximately $1.63 in Goodwill and Intangibles for every $1.00 of Stockholders’ Equity.
Good deal? How much more can they handle?
Wait, now Bob Mariano wants to sell Roundy’s? My opinion is as follows. What if he sells to Burkle again? Burkle’s Yucaipa will just turn the chain around, roll out fresh stores and in five years sell them off to some generic vanilla box grocery retailer!
Being a retail designer, I must also mention that I hope Bob Mariano wakes up when it comes to internal telecom in his store. While retailers such as Meijer, Whole Foods, Dominick’s, Jewel-Osco, Walgreens–the list goes on and on–use full featured PBX phone systems with wireless technology, Bob’s Roundy’s stores still use 1970’s technology with Aiphone “Marketcom” paging handsets with a separate modern phone system.
Doesn’t he realize he can be more efficient with his stores by combining the phone system and intercom into one? This shows lack of understand for technology in their stores and I can only hope they don’t do this “outdated” setup with other technologies. You can enter a brand new market like Chicago, design the most beautiful store, but have old technology which totally destroys the whole concept. Employees deal with juggling 2 handsets, calls get lost and customers get ticked off!
Since Ron Burkle is selling off his interest in Wild Oats to Whole Foods, ol’ Ron has some spending money to buy Roundy’s.
This way, operating in the Milwaukee/Chicagoland corridor, would give his investment firm supermarket chains on each coast and Mid America. Likewise, he might still pull off buying the Tribune Co. This would be a nice fit in his empire.
Also you can never count out Kroger. With this acquisition, it would solidify its Midwest operations. However it would probably sell off the Chicagoland sites being proposed by Roundy’s, since it fears union towns.
Roundy’s, like anyone else, should sell itself if the price is right. Business valuations aren’t an exact science, they’re subject to a lot of human emotion. It isn’t clear who’d pay the most: a supermarket company, a real estate firm, a private capital group, or someone else. The best thing Roundy’s can do is schedule the auction, and see what bids come in.
Private equity investors usually maintain an investment horizon of approximately three-five years, after which they begin looking for a liquidity event. This appears to be no different and, given the company’s nice turnaround effort, this probably spells an intriguing opportunity for another buyer. Ordinarily I would say that a strategic buyer would make most sense–so another grocer–but in this case Mr. Mariano seems to have a strong vision that another buyout firm could ride to the next level of valuation.
More Discussions
Is Five Below Poised For Even Greater Growth?
Five Below is hitting serious growth numbers. Can this trend continue?Should IKEA Be Flattening Management?
Should IKEA be trimming down its management headcount?Is Legislation the Answer on Visa, Mastercard Swipe Fees as ~$200 Billion Record Is Set?
Is lawmaking the way forward on swipe fees?
Roundy’s debt has been downgraded due to disastrous same store sales and the fact that they are facing an onslaught of new competition coming into the markets they operate. The same store sales issue is mostly due to Wal-Mart in the rural areas and cannibalization in the Milwaukee area. Minneapolis has been a struggle with Rainbow, however, I think those stores will be sold off separately, and at a nice profit. Remember, they bought them for pennies on the dollar in the Fleming bankruptcy sale.
Roundy’s biggest selling point is their 60%+ market share in Milwaukee. They have made multiple strategic acquisitions, just small enough to avoid FTC approval. That will soon change as Wal-Mart Supercenter, Woodman’s, Costco, Super Target, Whole Foods, Trader Joe’s, and others open more units attacking them at both ends. Roundy’s is probably worth more now and they will be at any time in the future. I’m sure they will sell while their Milwaukee market share is over 60% and not when it drops to 48%.
Most likely I see Roundy’s being sold to a company like Yucaipa who has a successful history working with Roundy’s management team. Whoever buys them must keep Bob Mariano on board so he can fulfill his destiny of returning to Chicago.
Will Roundy’s be sold? I think so. The potential sale comes despite the recent announcement of new initiatives including a major push into Chicago and the launch of 2500 private-label products over the next three years.
The Wall Street Journal has reported that the chain was doing “so well” that owners, Willis Stein & Partners, are ready to cash in. Meanwhile, Moody’s Investor Service downgraded its rating on Roundy’s last month from stable to negative after Roundy’s decision to acquire the Milwaukee-area Jewel-Osco stores. The Moody’s report also noted that Roundy’s comparable-store sales were negative and getting worse. Which’s the best weathervane?
Financial guys rarely want to put on a grocer’s apron for very long. These opportunistic gurus want to capitalize on the financial values at that great acquisitions school, Guru U.
I believe that it is the track record for this investment firm to cash out its profits in a similar timetable, so it likely will happen if they can find a good buyer. Mr. Mariano’s comments about entering the Chicago market come at an interesting time considering this development. With his track record and experience in Chicago, many will think that this is the beginning of a great opportunity for Roundy’s. There are undoubtedly others that will feel that breaking into the Chicago market is so difficult that it will be a major problem for Roundy’s. It will be very interesting to watch this unfold.
This is simply another in a string of smart business decisions by this team. Who should buy Roundy’s? Anyone who can, and who understands why this turnaround metamorphosis has been so successful. Who shouldn’t? Anyone who wants to flip it again. This is a business opportunity for the long haul now.
After sifting through the numbers, SVU paid about $12.4 billion for around 992 stores after the CVS and Savway spinoffs. Roughly $12.5 million per store.
Roundy’s would be $13 million per store or $14.4 million per store if you assign $100 million to the Rainbow problem and spread the remaining $1.9 billion over 132 Copp’s and PNS stores.
Good deal?
Before you decide, consider the Flemingesque appearance of SVU’s balance sheet.
Total stockholder equity at December 2, 2006 – $5,239,000,000
Total Goodwill at December 2, 2006 – $5,871,000,000
Intangibles, Net – $2,667,000,000
To summarize, SVU’s Goodwill and Intangibles, Net increased $6,830,000,000 to a total of $8,538,000,000 from the same quarter in the pre-acquisition year while Stockholder’s Equity increased $2,620,000,000 to $5,239,000,000 over the same period.
The Company has approximately $1.63 in Goodwill and Intangibles for every $1.00 of Stockholders’ Equity.
Good deal? How much more can they handle?
Wait, now Bob Mariano wants to sell Roundy’s? My opinion is as follows. What if he sells to Burkle again? Burkle’s Yucaipa will just turn the chain around, roll out fresh stores and in five years sell them off to some generic vanilla box grocery retailer!
Being a retail designer, I must also mention that I hope Bob Mariano wakes up when it comes to internal telecom in his store. While retailers such as Meijer, Whole Foods, Dominick’s, Jewel-Osco, Walgreens–the list goes on and on–use full featured PBX phone systems with wireless technology, Bob’s Roundy’s stores still use 1970’s technology with Aiphone “Marketcom” paging handsets with a separate modern phone system.
Doesn’t he realize he can be more efficient with his stores by combining the phone system and intercom into one? This shows lack of understand for technology in their stores and I can only hope they don’t do this “outdated” setup with other technologies. You can enter a brand new market like Chicago, design the most beautiful store, but have old technology which totally destroys the whole concept. Employees deal with juggling 2 handsets, calls get lost and customers get ticked off!
Since Ron Burkle is selling off his interest in Wild Oats to Whole Foods, ol’ Ron has some spending money to buy Roundy’s.
This way, operating in the Milwaukee/Chicagoland corridor, would give his investment firm supermarket chains on each coast and Mid America. Likewise, he might still pull off buying the Tribune Co. This would be a nice fit in his empire.
Also you can never count out Kroger. With this acquisition, it would solidify its Midwest operations. However it would probably sell off the Chicagoland sites being proposed by Roundy’s, since it fears union towns.
Roundy’s, like anyone else, should sell itself if the price is right. Business valuations aren’t an exact science, they’re subject to a lot of human emotion. It isn’t clear who’d pay the most: a supermarket company, a real estate firm, a private capital group, or someone else. The best thing Roundy’s can do is schedule the auction, and see what bids come in.
Private equity investors usually maintain an investment horizon of approximately three-five years, after which they begin looking for a liquidity event. This appears to be no different and, given the company’s nice turnaround effort, this probably spells an intriguing opportunity for another buyer. Ordinarily I would say that a strategic buyer would make most sense–so another grocer–but in this case Mr. Mariano seems to have a strong vision that another buyout firm could ride to the next level of valuation.