Winn-Dixie is Way Cheap. Will it Be Acquired?

With Winn-Dixie's stock, which closed Tuesday at $15.87, down by nearly half over the past year, the grocer is looking more and more like a takeover candidate. That price puts the stock near the company's book value.

Bigger chains such as Kroger or Supervalu might take advantage of the bargain price to extend their footholds into the southeast. Winn-Dixie owns about 500 stores in the region.

Other options, according to Mark Krieger, writing at Seeking Alpha, include issuing "a small cash dividend" or a stock buyback. But, he added, it "is also feasible that they become vulnerable as a takeover target."

Winn-Dixie came out of bankruptcy in November 2006, and â€" given the struggles all supermarkets are undergoing â€" has turned things around nicely. Even as it remodels dozens of its stores (the plan is to rehab about 200 of them), the company is posting slightly higher gross margins, though rising costs heave continued to eat into profits.

The chain last week announced it would sell off 49 stores in Florida to rival Publix.

The company's main competition comes from Publix and Wal-Mart. Both are formidable. It could be that Winn-Dixie, despite the strength of its brand in the south (though somewhat weakened thanks to the bankruptcy), might do better as part of a bigger chain.

As far back as December, another Seeking Alpha writer, Amit Chokshi, called Winn-Dixie "an obvious acquisition target." On the day he wrote that, the stock was trading at $18.91.