For potential acquirers, there may never be a better time to go grocery shopping in the U.S.
Kroger Co., the largest U.S. grocery-store chain, traded last week at an 86 percent discount to its projected sales this fiscal year, leaving it cheaper than 99 percent of companies in the Standard & Poor’s 500 Index, according to data compiled by Bloomberg. The Cincinnati-based company, which lost $4.7 billion in market capitalization during the last recession, was valued at 10.8 times estimated earnings, the lowest level for a U.S. food retailer greater than $2 billion, the data show.
Kroger, which has increased sales in every year since at least 1987 even as Target Corp. and Wal-Mart Stores Inc. grabbed market share from other supermarkets, may now become a target for retailers outside the U.S. or private equity firms, according to Northcoast Research Holdings LLC. Valued at $13.7 billion last week, Kroger could still attract a takeover offer 30 percent above its current price, Point View Wealth Management Inc. said, making it the largest grocery acquisition on record.
“Of the traditional pure-play grocery stores, Kroger is the crown jewel,” David Dietze, president and chief investment strategist at Summit, New Jersey-based Point View, which owns shares of Kroger, said in a telephone interview. “They have a long consistent record of positive same-store sales performance. It’s timely to acquire Kroger because it’s cheap.”
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