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Jax Daily Record Thursday, Oct. 8, 202008:44 AM EST

Pandemic sales boom may pave way for IPO by Winn-Dixie parent

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Southeastern Grocers takes a step toward going public after its 2018 bankruptcy.
by: Mark Basch Contributing Writer

Six years after withdrawing its original registration for an initial public offering, Southeastern Grocers is again considering an IPO.

The Jacksonville-based parent of Winn-Dixie and three other supermarket chains last week filed a confidential registration statement for an IPO, without giving any details.

It could be the COVID-19 pandemic that is paving the way to go public.

Grocery store sales have been surging this year as Americans eat more meals at home. Some analysts say that helped Albertsons Companies Inc. go public in June, five years after its original IPO filing.

Albertsons is the second-largest U.S. supermarket operator (behind The Kroger Co.) with 2,252 stores in 34 states under a number of banners, but none in the Southeast. It left the Jacksonville market in 2005.

In its first quarterly report after the IPO, Albertsons said sales jumped 21.4% in the quarter ended June 20.

That trend is creating positive sentiment for the supermarket industry on Wall Street, making 2020 a good time to sell stock.

“We understand the desire to assume that food at home demand and consumer shopping patterns will normalize post-COVID, but there is a case to be made for some sustained lift,” Wells Fargo analyst Edward Kelly said in a research note on Albertsons last month.

Southeastern Grocers has not publicly released any financial data since its last IPO filing in 2013.

But in an interview published last week in the Tampa Bay Times before the IPO filing, CEO Anthony Hucker said the company has had six consecutive quarters of positive sales growth at stores open for more than one year.

Southeastern Grocers would have to publicly file a registration statement with the Securities and Exchange Commission before going through with an IPO.

The company filed a confidential draft registration statement under SEC rules for large companies that went into effect in July 2017. 

Previously, nonpublic registration was used by emerging growth companies.

The SEC said the confidential filing allows stock registrations to be reviewed without concern for market fluctuations during the process.

“We are striving for efficiency in our processes to encourage more companies to consider going public, which can result in more choices for investors, job creation, and a stronger U.S. economy,” SEC Chairman Jay Clayton said in a news release about the rules.

Southeastern Grocers said in a news release that shares in an IPO would be sold by existing stockholders.

The company has been owned by a group of investment firms since it went through a prepackaged Chapter 11 bankruptcy reorganization in 2018.

A group of creditors received stock in the company in exchange for debt.

Court documents suggested investment firms Fidelity Management & Research Co. and Osterweis Capital Management were in line to own more than 15% of Southeastern Grocers’ stock when it emerged from bankruptcy, but the documents never specified distribution of the shares.

Funds affiliated with investment firm Lone Star Funds owned the company before the Chapter 11 filing, but its equity was wiped out in the reorganization.

After announcing its IPO filing last week, Southeastern Grocers said Oct. 5 it is issuing $325 million in senior secured notes.

The proceeds from the notes will be used to pay off debt under a term loan facility.

Southeastern Grocers was formed by the 2012 merger of Jacksonville-based Winn-Dixie Stores Inc. and Bi-Lo Holdings.

The company operates about 550 supermarkets in seven states under the Winn-Dixie, Bi-Lo, Harveys and Fresco y Mas banners.

However, the company in June announced plans to sell 62 stores and discontinue the Bi-Lo brand.

Waste Management yet to close on Advanced Disposal

Waste Management Inc. had hoped to close its acquisition of Ponte Vedra-based Advanced Disposal Services Inc. by the end of the third quarter. 

The quarter ended with the companies still waiting, nearly 18 months after the original merger agreement was signed.

The deal was expected to take about a year to complete because of antitrust issues.

Waste Management is the largest U.S. solid waste disposal company with about 28% of the market at the time of the merger agreement, while Advanced Disposal ranked fourth with about 3%.

The companies thought they had resolved those issues by agreeing in June to sell $835 million in assets from the merged company to GFL Environmental.

However, the companies said in separate SEC filings last week they still are waiting for the U.S. Department of Justice to complete its regulatory review.

The companies said they are hoping to close the deal early in the fourth quarter.

Waste Management agreed in April 2019 to buy Advanced Disposal for $33.15 a share. However, with the long delay, the companies agreed in June 2020 to lower the price to $30.30.

Landstar System downgraded

Despite encouraging trends in the trucking industry and an increased earnings forecast by the company, Susquehanna Financial Group analyst Bascome Majors last week downgraded Landstar System Inc. from “positive” to “neutral.”

“Truckload’s fundamental surge is abundantly clear entering 4Q,” Majors said in a research report on the trucking and logistics industry.

“With this situation now very much a ‘known known’ and shares performing well year-to-date, shorter-term sentiment has shifted against the group in recent weeks,” he said.

Landstar CEO Jim Gattoni increased the Jacksonville-based trucking company’s third-quarter earnings forecast at an investor conference last month, citing strong freight traffic.

That forecast sent Landstar’s stock to a record $139.99 a month ago, but it has since dropped and was trading close to $125 last week.

“Despite a substantially positive preannouncement earlier in September, Landstar shares have sold off with the rest of the group,” Major said.

“While we also see the company substantially exceeding current consensus in 2021-22 (some forecasts admittedly stale since preannouncement), their model benefits most directly from spot rate inflation compared to other asset-based or asset-light carriers, and we fear shares risk earlier and lasting multiple compression when spot rates reach their apex,” he said.

Majors has a $141 price target for the stock but said he doesn’t “see enough remaining upside to support a continued Positive rating.”

Fidelity selling F&G Reinsurance to Aspida Holdings

Fidelity National Financial Inc. last week said it agreed to sell its F&G Reinsurance Ltd. subsidiary to Aspida Holdings Ltd.

Jacksonville-based Fidelity acquired the company in June when it bought FGL Holdings, which provided annuities and life insurance through a company called F&G.

Title insurance company Fidelity bought FGL to diversify its business. 

F&G Reinsurance provides reinsurance solutions to third-party life and annuity companies. Fidelity said the sale allows the rest of F&G to focus on its core business.

Fidelity did not announce terms of the sale but said the deal, which could close in the fourth quarter, is not expected to have a material impact on its financial results.

Fortegra forms new insurance unit

Insurance services company Fortegra Financial Corp. last week said it formed a new excess and surplus lines subsidiary called Fortegra Specialty Insurance Co.

Jacksonville-based Fortegra said the new subsidiary is domiciled in Arizona and is working to obtain regulatory approvals to conduct business throughout the U.S.

CEO Richard Kahlbaugh said in a news release the move allows Fortegra “to broaden our product reach and scope within the U.S.”

Fortegra was an independent public company before being acquired by New York-based Tiptree Inc. in 2014.

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