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United Natural Foods Sues Goldman Sachs, Advisors Over Alleged Scheme in $2.9B Supervalu Deal

Rhode Island-based UNFI alleges that during the transaction process, the advisors on its $2.9 billion deal for Eden Prairie-based Supervalu last July schemed UNFI out of more than $140 million.

United Natural Foods Sues Goldman Sachs, Advisors Over Alleged Scheme in $2.9B Supervalu Deal
Photo by: Tony Webster

Food wholesaler United Natural Foods Inc. seems to be having buyer’s remorse regarding a $2.9 billion deal made last July to acquire Eden Prairie-based food wholesaler and Cub Foods owner Supervalu. But the problem isn’t over Supervalu; it instead involves the companies United Natural Foods (UNFI) enlisted to advise on the transaction.

Providence, Rhode Island-based UNFI this week filed a lawsuit within the Supreme Court of the State of New York against global investment firm Goldman Sachs Group Inc. and its subsidiaries. UNFI alleges Goldman Sachs extracted millions of dollars in unjustifiable interest, fees, and other damages from UNFI and UNFI shareholders.

Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated were also named in the suit. Similar but separate claims were also filed against Minneapolis-based U.S. Bank for an alleged collusive role in the offenses.

“We expected our extremely well-paid transaction advisors to provide ethical counsel and unbiased support around this landmark acquisition—not leverage their positions to pursue larger profits for themselves and other clients at our expense and ongoing damage,” said Steve Spinner, UNFI's CEO and chairman, in a statement.

UNFI’s complaint alleges four counts of contact:

  • Misappropriating $40.5 million. The defendants allegedly kept for itself money it was supposed to provide UNFI at the close of the transaction as part of a specific loan agreement.
  • Misappropriating $11.4 million. The defendants allegedly kept for themselves $11.4 million it had previously promised to discount UNFI in a loan agreement.
  • Dealing with UNFI in bad faith and in excess of $140 million. The defendants allegedly forced UNFI to unnecessarily increase its transaction financing cost by $140 million.
  • Committing fraud against UNFI and manipulating the $470 million market for Supervalu credit default swap (CDS) holders. The defendants allegedly convinced UNFI to add Supervalu as a co-borrower on the key loan, with the reason unbeknownst to UNFI being that Goldman Sachs had struck a deal with Supervalu CDS holders to benefit Goldman Sachs and Supervalu CDS holders at the expense of UNFI.

“Rather than respect its contractual obligations and the law, we believe Goldman Sachs played by its own set of rules both when dealing with us and CDS market participants, for its own benefit,” said Jill Sutton, UNFI’s chief legal officer and general counsel, in prepared remarks.

Quinn Emanuel Urquhart & Sullivan, LLP and Coburn & Greenbaum PLLC are representing UNFI as external legal counsel as the suit moves forward.

Goldman Sachs did not comment on the allegations as of press time.

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