Cerberus’s investment in a leading grocer in the U.S. showcases the Firm’s ability to utilize its unique operational expertise and financial resources to transform a company’s operating performance and build long-term value.
When a Cerberus-led consortium of investors and two retailers acquired the company, it was suffering from years of mismanaged stores and substantial real estate debt. As part of the transaction, the grocer’s stores, pharmacies and distribution centers were divided among the acquirers, with Cerberus’s several hundred stores consolidated under a new operating company.
Following the acquisition, Cerberus moved quickly to install a new management team, which included members of Cerberus Operations and Advisory Company (COAC). Together with COAC and Cerberus, the management team embarked on a course to enhance the company’s value by:
- Improving operations on a store-by-store level
- Reducing the company’s debt significantly by refinancing or paying down obligations to creditors
- Executing a sale-and-leaseback transaction for the stores’ properties, eliminating more than $300 million in real estate debt
- Launching new store-branded product lines
- Implementing an in-sourced collections function to improve recovery of unsolicited receivables
- Lowering product costs by transitioning all prescription sourcing and grocery supply to retailer-owned cooperative Associated Wholesale Grocers (AWG)
Cerberus’s investment in the grocer enabled the company to significantly decrease its debt, meet consumer demand by offering new products, steadily increase its performance capabilities and continue profitable operations.