Tuesday, October 18, 2022

Apollo and Cerberus to Milk Albertsons of $4 billion


Albertsons private equity owners will milk the company for $4 billion in special dividends before Kroger closes on its grocery competitor.  BIG by Matt Stoller reported:

...in just a few weeks, and long before any merger trial, Albertsons will hand up to $4 billion to its private equity investors Apollo Capital and Cerberus Capital Management, in a special dividend. That’s the cash and working capital necessary to keep a supermarket chain functional, gone, to the private equity investors, even if the merger falls through. And that’s worrisome.

Stoller called it a smash and grab financial move as it will take all of Albertsons' working capital.  It's an old move for private equity underwriters (PEU).  The greed and leverage boys have multiple ways of bleeding affiliates. deal fees, annual management fees. liquidity recapitalizations, special dividends, special distributions, spinning off physical assets into a separate company, moving intellectual property to another PEU owned company, ring fencing liability via complex corporate structures, buying discounted debt of troubled affiliates and converting that to equity after the PEU drives the company into bankruptcy and sponsoring politicians of both political parties.

That's why the greed and leverage boys keep their preferred carried interest taxation.  Politicians Red and Blue love PEU and increasingly, more are one.