Kroger Could Buy Albertsons

Consolidation of major grocers would also add to Kroger's stable of gas stations

BOISE, Idaho -- Five biddersincluding the country's largest supermarket chain, Krogerhave emerged as suitors for the Albertsons Inc. grocery chain, people involved in the auction told the New York Times.

At least three bidders are consortiums led by investment groups, the sources said, including one led by Kohlberg Kravis Roberts, one by Thomas H. Lee Partners and one by the Yucaipa Cos., which earlier this year agreed to pay about $150 million for a stake in the Pathmark supermarket chain.

The preliminary bids for Albertsons, [image-nocss] which put itself up for sale in September, are all in the high $20s per share, said the sources, which would value the deal at more than $10 billion. Any offer would be expected to include about $6 billion in debt, the report added.

The five bids are for the entire Albertsons chain, which is based in Boise, Idaho. Separately, several drugstore chainsWalgreens, Rite-Aid and CVShave lined up to buy Albertsons' drug operations, said the report, either from the company or the new owner.

The acquisition of Albertsons' 2,300 stores would give Kroger a strong presence in the Northeast, a region where the company does not have a significant presence.

The bid comes as traditional supermarkets are struggling to regain market share in the face of discount retailers such as Wal-Mart and Costco and organic and specialty stores like Whole Foods and Wild Oats.

The combination of Kroger and Albertsons would have sales almost as large as that of Wal-Mart's grocery business, the Times said.

Kroger, based in Cincinnati, operates more than 2,500 grocery storessome with gasolineunder names such as Fred Meyer, Ralphs, Smith's and King Soopers. It also operates nearly 800 convenience storesmost with gasolinearound the country under the Kwik Shop, Loaf N Jug, Mini Mart, Quik Stop Markets, Tom Thumb Food Stores and Turkey Hill Minit Markets banners.

Albertsons operates approximately 2,300 grocery and drug stores in 31 states under the names Albertsons, Jewel-Osco, Acme Markets, Sav-on, Shaw's and Osco Drugs. It operates about 230 Albertsons Express and Jewel Express gas stations.