Albertsons grabs Rite Aid and how Kimco Realty is poised to be a Beneficiary.
Sources: Jessica Hartogs, (LinkedIn Daily Rundown); Lauren Thomas, (CNBC Retail Reporter)
Albertsons is buying most of Rite Aid. Walgreens had previously tried to acquire the drugstore but the government blocked a full sale; the Rite Aid rival is now in the process of buying almost 2,000 stores instead. Albertsons will acquire the remainder, creating a company with a combined value of around $24 billion and annual revenue of roughly $83 billion. The merger will help both brands fight increasing pressure from online retailers such as Amazon — which is making pushes into both groceries and health care. (LinkedIn, Daily Rundown)
In light of this deal, real estate owner Kimco Realty is poised to benefit from Albertsons’ acquisition of Rite Aid as they possess roughly a 9.7% stake in Albertsons. The real estate investment trust is expected to unlock additional liquidity as the supermarket chain completes its acquisition of Rite Aid. (CNBC, Retail)
The retail REIT's shares were up around 2 percent Tuesday afternoon on the news.
"Beyond the strong returns we have already generated, we will have greater flexibility and liquidity with our investment via the public markets," Kimco CEO Conor Flynn said in a statement. The deal between Albertsons and Rite Aid demonstrates "what we believe is the future of retail," he added.
the REIT and shopping center owner is expected to use the liquidity boost to pay down debt or fund its redevelopment pipeline. On a recent conference call with analysts and investors, Kimco's management said the company was also focused on disposing of assets in the coming year, moving out of less-profitable markets.
"Most investors have probably written off this [Albertsons] investment but even the repayment of original principal would help KIM in its deleveraging efforts," Boenning & Scattergood analyst Floris van Dijkum told CNBC.
Kimco shares have fallen around 15 percent already this year. The company has been hit as other retail landlords, namely mall owners, are under fire after news of store closures and tenants going bankrupt.
Some of Kimco's top tenants today include Florida-based grocer Publix, TJ Maxx owner TJX, Home Depot and Kohl's.
February 20, 2018