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In Dec-05 a consortium consisting of Cerberus, Supervalu, CVS Corp and Kimco Realty reportedly offered US$9.6bn for the outstanding common stock of US food retailer Albertson’s, Inc. Including the company’s net indebtedness of US$6.4bn, this valued the business at exactly US$16bn. This implied the following multiples for the twelve months to 3-Nov-05: 39% of sales (US$41,273m), 6.6x EBITDA (US$2,429m), 12.6x EBIT (US$1,272m), and 153% of net capital employed (US$10,427m).

On 3-Feb-05 the company had US$8.2bn worth of land and buildings (at book value) on it’s balance sheet. This represents approximately half of its stores and most of its administrative offices and distribution facilities. The remaining stores are leased. The presence of a real estate investor in the consortium implies that the consortium intended to use at least part of that real estate to finance the transaction. Refinancing the real-estate through a sale at book value and leaseback at an estimated yield of 5% would cut the purchase price in half, while only reducing EBITDA by only US$400m (1/6^th) thereby reducing the purchase price multiple from 6.6x to 4.0x EBITDA.

Management rejected the offer as being too low and terminated the sale process and focusing on selling underperforming units of the company.