CNBC’s Jim Cramer said Wednesday that owning Albertsons, the US grocery operator, is worth owning. USA He is making his third attempt at IPO if investors can get the shares at the right price.
Albertsons, which owns the Albertsons, Safeway, Acme and Shaw supermarkets in dozens of states, plans to raise up to $ 1.32 billion when it is released on Thursday. A group of shareholders offers nearly 66 million shares to the public in the price range of $ 18 to $ 20.
“I think Albertsons is worth having,” but it should be purchased at “no more than $ 24 to $ 25,” said the “Mad Money” host. “It’s definitely not the best breed, but it’s also not rubbish.”
Cramer recommends the actions after seeing the grocery retailer take various steps to address its debt burden, bring in a new CEO, and rehabilitate its stores and operations.
He noted that Albertsons improved his balance sheet, where debt fell from nearly $ 12 billion in 2015 to $ 8.7 billion; installed a new CEO at Vivek Sankaran, who previously led PepsiCo’s food business in North America; and added delivery services at most of its approximately 22,520 stores.
Albertsons failed its public offerings in both 2015 and 2018. The latest attempt was postponed due to suboptimal market conditions.
As the current coronavirus pandemic has given grocery stores a boost, Cramer is convinced the third time around could be a charm now that the Idaho-based parent company is a “better company” than it ever was.
“All of these moves are working. After years of stagnation, Albertsons sales grew by more than 3% last year,” including “2% same-store sales growth. Great improvement from where they were.” said.
Some concerns still linger for the stock expert. Cerberus Capital, which was deprived of the supermarket operator more than a decade ago through a leveraged purchase, will maintain control of the company in the public market, diluting the power that public shareholders will have to run the business. Furthermore, the grocery industry is full of competition and its sales will return to reality once Covid-19 is resolved.
“This Albertsons deal may be better than you might expect, but I think the best part of the IPO cycle may have come and gone, perhaps with a lot of this market, and therefore I tell you to exercise. With precaution”. Cramer said.
In the event that Albertsons’ IPO is on the high end, the company would be valued at $ 11.61 billion, considering the outstanding shares and certain convertible preferred shares. BofA Securities, Goldman Sachs, JP Morgan and Citigroup are the main underwriters of the offering.
Subscribers have the option to buy another 9.9 million shares. If that option is taken advantage of, the offer could cost around $ 1.5 billion.
-Reuters contributed to this report.
Disclosure: Cramer’s charitable trust owns PepsiCo shares.
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