Albertsons Cos Inc [ABS.N], the No.2 U.S. grocery chain, said it hoped its initial public offering would raise $1.7 billion, an ambitious target at a time of intensifying industry competition and uncertainty in global capital markets.
The determination of Albertsons' majority owner, private equity firm Cerberus Capital Management LP, to carry out the IPO despite market volatility underscores confidence that it can fetch a high valuation.
Albertsons said on Friday that it expected to price 65.3 million shares at between $23 and $26 each, valuing the company at up to $12.35 billion. (bit.ly/1M5Uu3C)
However, several companies that debuted in 2015 are trading below their IPO price, hit by weeks of market declines. Some firms have even delayed going public for the time being.
"Their growth plan is not clear," said Francis Gaskins, president of research firm IPO Desktop. "It is not clear how they will grow their top-line revenue and earnings."
Rivalries are heating up in the grocery business, with big chains getting squeezed by mass retailers including Wal-Mart Stores Inc (WMT.N) and upscale chains such as Whole Foods Market (WFM.O).
Albertsons, the second-largest U.S. grocer after Kroger Co (KR.N) by number of stores, highlighted in a filing that it also faced a growing threat from online grocery stores.
"It's only going to get worse for Albertsons," David Livingston of DJL Research, which focuses on the supermarket industry.
"Except for a few markets like Northern California and Hawaii, we generally find them to be performing below market average."
Albertsons, whose brands include Safeway and Vons, said its pro-forma loss increased to $358 million in the year ended June 30 from $330 million a year earlier, while its revenue was little changed at $57.9 billion.
West Coast grocery chain Haggen, which filed for bankruptcy last month, has sued Albertsons, accusing it of misrepresenting the financial health of stores it sold to Haggen. Albertsons has said the allegations are "without merit".
Albertsons is headed by Robert Miller, who has previously been at the helm of Rite Aid Corp (RAD.N) and served as vice chairman of Kroger.
Citigroup, Morgan Stanley, Goldman Sachs, Merrill Lynch and Pierce, Fenner & Smith are the IPO's underwriters. The company will list on the New York Stock Exchange under the symbol "ABS."
(This version of the story was refiled to correct grammatical error in paragraph 1)
(Reporting By Sudarshan Varadhan and Sruthi Shankar in Bengaluru. Additional reporting by Sruthi Ramakrishnan and Richa Naidu; Editing by Savio D'Souza and Saumyadeb Chakrabarty)