No one can accuse Bob Miller of being afraid of a challenge.
During a long and distinguished career in mass market retailing the chief executive officer of Albertson’s LLC has proven equal to any assignment that he has taken on, including at least one where few people thought anybody could succeed.
Now Miller is faced with another difficult task — making the acquisition by Albertson’s of five prominent but troubled food/drug combination store chains pay off.
The complex deal — which calls for Albertson’s to pay Supervalu Inc. $100 million and assume $3.3 billion in debt for 877 stores that operate under the Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market banners, together with related Osco and Sav-on in-store pharmacies — will place the newly enlarged company among the top 10 players in the supermarket and retail pharmacy sectors. The Boise, Idaho-based retailer will have 1,069 stores and a strong presence in such important markets as Boston, Philadelphia and Chicago.
For Miller and his colleagues, the crux of the job ahead will be to find ways to make those assets work in harmony, a feat that three previous owners — American Stores, an earlier incarnation of Albertson’s and Supervalu — failed to accomplish. In order to compete effectively against such larger food and drug retailers as Walmart, Kroger, Walgreens and CVS/pharmacy, Albertsons will have to leverage its scale effectively and ensure that all of its component parts are united in pursuit of a common strategy.
Miller touched on what needs to be done when the acquisition was announced earlier this month: “We see great potential to improve operations, drive new energy and create a winning attitude with our store-level associates, and earn back our customers’ trust and business.”
The chances of succeeding where so many others have fallen short appear to be poor, but Miller has overcome even steeper odds. In December 1999 he was brought in to rescue Rite Aid after accounting irregularities under previous management brought the drug chain to the verge of bankruptcy. Miller and the executive team he assembled put in place strict financial controls; overhauled the way Rite Aid does business; improved the company’s operations, financial performance and balance sheet; and established a new corporate culture.
Central to those efforts, which enabled Rite Aid to avoid Chapter 11 and start down the long road toward returning to viability, were Miller’s financial acumen and the respect it commanded on Wall Street. His skill at dealing with lenders and creditors gave the company the time it needed to stabilize its condition and start to recover.
Those strengths are again in evidence in the current acquisition. Albertson’s is owned by Cerberus Capital Management, Kimco Realty Corp., Klaff Realty, Lubert-Adler Partners and Schottenstein Stores Corp., all of which are backing the deal and a separate agreement under which they will conduct a tender offer for up to 30% of Supervalu’s common stock.
After the closing of both transactions Miller will become non-executive chairman of Supervalu’s board of directors. That company will comprise a leading food distribution business, the Save-A-Lot discount grocery chain, and regional supermarkets under the Cub, Farm Fresh, Shoppers, Shop ’n Save and Hornbacher’s names.
Albertson’s and Supervalu both have a full agenda. The former has to cope with the problems inherent in quintupling its size in one fell swoop, while the latter must put its remaining assets in order and make the company more productive than it was prior to the sale. Both companies are fortunate that Bob Miller will be there to provide guidance in addressing those issues.