October 14, 2015 / 4:10 PM / 4 years ago

Supermarket chain Brookshire Grocery explores sale: sources

(Reuters) - Brookshire Grocery Company is exploring a sale that could value the family-owned operator of supermarket stores in Texas, Louisiana and Arkansas at as much as $1 billion, including debt, according to people familiar with the matter.

The move underscores a trend toward consolidation in the fragmented U.S. supermarket sector, as companies respond to low profit margins by seeking economies of scale through acquisitions.

Brookshire is working with investment bank JPMorgan Chase & Co (JPM.N) on an auction that has attracted larger peers, including Albertsons Companies Inc ABS.N, the people said this week.

Albertsons, which is on the verge of going public in an IPO, in 2013 acquired United Supermarkets, which operates 54 stores throughout Texas.

Brookshire has annual earnings before interest, taxes, depreciation and amortization of around $150 million, the people added.

The sources asked not to be identified because the sale process is confidential. Brookshire had no immediate comment. JPMorgan and Albertsons declined to comment.

Based in Tyler, Texas, Brookshire operates more than 150 stores under the Brookshire’s, Super 1 Foods and FRESH by Brookshire brands. It was founded in 1928 by the late Wood T. Brookshire.

Brookshire is not unionized, making it more attractive to potential buyers. Both Albertsons and its biggest competitor Kroger already have a foothold in Texas. The largest direct competitor of Brookshire in Texas is H.E. Butt Grocery Co.

No supermarket chain has a presence across all U.S. states, though some of them have growing aspirations. The top three industry players, Publix Super Markets, Albertsons and Kroger Co (KR.N) collectively have a market share of just 27 percent, according to IBIS World.

Recent acquisitions in the sector include Albertsons’ $9.2 billion takeover of Safeway earlier this year, and Kroger’s $2.4 billion purchase of North Carolina-based Harris Teeter last year.

Albertsons is scheduled to price its initial public offering later on Wednesday, seeking to raise as much as $1.7 billion. It plans to use the proceeds to pay down debt.

Reporting by Lauren Hirsch and Mike Stone in New York; Editing by Christian Plumb

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