Sour grocery, IPO marts turn off Ralphs; supermarket firm shelves planned $91 million offering.The dampened Southland grocery market and Wall Street's sour view of new share offerings prompted Ralphs Supermarkets Inc. to withdraw its proposed initial public offering last week, analysts said. Too, despite the fact that the planned IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. was part of a broad recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. plan, the retreat should not affect the company's operations or ability to keep pace with its cutthroat cut·throat n. 1. A murderer, especially one who cuts throats. 2. An unprincipled, ruthless person. 3. A cutthroat trout. adj. 1. Cruel; murderous. 2. competitors, they said. Compton-based Ralphs Supermarkets, holding company of the 156-store Ralphs Grocery Co. supermarket chain, had planned to raise between $91 million and $103 million with its IPO. But several hurdles loomed and eventually derailed the plan. First, the IPO market is weak these days. "The IPO window is clearly closed at this time," said Lloyd Greif, president of downtown Los Angeles-based Greif & Co., an investment banking firm. Many IPOs that surfaced this year are not performing very well, seconded Duane Norris, vice president of Salomon Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) ., a New York-based investment firm. Ralphs Supermarkets was a year too late, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Greif. It would have succeeded if it had gone public a year ago, while the IPO market was still booming. "I think the market may have been a little better for Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, grocery chains at the end of 1991," said James Schmitt, owner of WestCountry Financial, a Camarillo-based institutional research firm. In addition, investors are wary of the sluggish supermarket industry. Food prices have been falling, but advertising and promotion budgets are rising amid increased competition -- all of which cuts into bottom lines, Norris explained. Such conditions are exacerbated in Southern California, already one of the most competitive grocery markets and now plagued by riot and earthquake. Most Southland supermarket chains reported first quarter profit declines. Arcadia-based Vons Companies Inc. reported an 80 percent drop in profits for its second fiscal quarter, a further indication of the lackluster grocery industry. Vons reported profits of $5.1 million for fiscal second quarter 1992 ended June 14, compared with $25.3 in profits during 1991. Sales were $1.3 billion for both those periods. One analyst said Ralphs Supermarkets' IPO failed because its asking price for the stock was too high at $15 to $17. At $16 a share, the company would have been valued at $1.35 billion, calculated Schmitt. It's worth $1.1 billion or $1.2 billion at most, he said. Also, company officials may simply have priced the stock at more than investors were willing to pay. At $10 to $12 a share, the IPO might have worked, Schmitt added. Most reasons for the IPO pullout pull·out n. 1. A withdrawal, especially of troops. 2. Change from a dive to level flight. Used of an aircraft. 3. An object designed to be pulled out. Noun 1. were not specifically related to Ralphs Supermarkets, Norris noted. Investors are not concerned, for instance, about the company's affiliation with Federated Connected and treated as one. See federated database and federated directories. Stores Inc., which was operating under Chapter 11 bankruptcy protection until recently, Schmitt said. Federated is a subsidiary of Canadian-based Campeau Corp. Following Federated's complicated reorganization plan A scheme authorized by federal law and promulgated by the president whereby he or she alters the structure of federal agencies to promote government efficiency and economy through a transfer, consolidation, coordination, authorization, or abolition of functions. , Federated Department Stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. Inc., a Federated subsidiary, took a 6.6 percent stake in Ralphs Supermarkets. Nor are investors concerned about Edward J. DeBartolo Corp.'s 60.34 percent stake in the company, Schmitt said. Edward J. DeBartolo is one of the largest shopping center shopping center, a concentration of retail, service, and entertainment enterprises designed to serve the surrounding region. The modern shopping center differs from its antecedents—bazaars and marketplaces—in that the shops are usually amalgamated into developers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The withdrawal will not dampen the ability of Ralphs Supermarkets to effectively compete in the marketplace, analysts said. The $91 million to $103 million the offering would have brought in "wasn't a huge amount of money" for the company, and it won't hurt operations for the company to go without it, Norris said. Rather, the IPO would have served as a "benchmark" for the retailer's owners. Calculating a public company's value is easily done by multiplying the stock and/or bond prices. In contrast, a private company's value is subjective, Norris said. Aside from affecting the firm's ability to obtain credit, nailing a value for shares benefits owners directly. If owners want to use their stock as collateral for a loan, a lender can clearly see the value of that collateral if the shares trade publicly, he explained. The IPO was only a part of Ralphs Supermarkets' four-point recapitalization plan. Another part, namely a $370 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility it plans to establish, is more crucial, Norris said. In addition, the company plans to retire $400 million worth of outstanding bonds and issue $300 million worth of new bonds. Analysts said neither the bond buyback nor new bond issuance should be hampered by the IPO withdrawal, although the tender offer for the $400 million worth of bonds was extended by two weeks. The plan for the credit facility is still on target, the company announced. The bond movement won't be affected because "the high yield market is incredibly strong right now," Norris said. The recapitalization plan is structured to allow the company to make another IPO in the future, but the company is under no obligation to do so, sources say. One analyst noted, however, that companies who fail IPOs the first time are often "marked," and may find investors even less receptive the first time around. |
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