Report: Supervalu Moving Toward Sale of Two Chains

According to Bloomberg, Cerberus Capital Management LP—which was previously considering making a bid for the company as a whole—might instead seek control of its two largest chains, Albertsons and Save-A-Lot.

After discussions about a sale of Supervalu, Inc., as a whole recently came to a halt, the struggling grocer is reportedly making progress toward a deal to sell its retail chains such as Albertsons and Save-A-Lot to private equity firm Cerberus Capital Management LP.
 
That’s according to a Bloomberg report, which cited unnamed “people with knowledge of the matter.” The news outlet reported that the company’s Save-A-Lot chain of stores has also received interest from parties such as private equity firm KKR & Company. (The Save-A-Lot chain is Supervalu’s largest, with more than 1,280 stores across the country—and Albertsons is the second largest, with more than 450 stores in the Northwest, southern California, and Nevada.)
 
Bloomberg previously reported that New York-based Cerberus was considering making a bid for Supervalu as a whole but said last week that plan had stalled because the firm had trouble obtaining funds for a leveraged buyout.
 
The firm might now seek control of Albertsons and Save-A-Lot, Supervalu’s two largest chains, and take an equity stake in what remains of Supervalu—a situation that would provide Supervalu cash to pay down a portion of its $6 million-plus in debt and allow it to focus on selling or restructuring its other nine chains, sources told Bloomberg.
 
The Bloomberg report comes four days after a Wall Street Journal report, also citing unnamed sources, said that Cerberus was considering a deal to buy Supervalu’s entire business and another to purchase just its Albertsons stores.
 
Cerberus reportedly wants to finalize a deal by the end of the year, and a takeover of all of Supervalu still remains a possibility.
 
Supervalu has declined to comment on any negotiations. The company said late last week that its previously announced “review of strategic alternatives is proceeding” and that it “continues to be in active discussion with several parties.”
 
In October, the company reported a net loss of $111 million, or 52 cents per share, for the quarter that ended September 8—which it chalked up to one-time charges, including eroding asset values and costs related to store closures. Excluding those $111 million in charges, the company broke even for the quarter, compared to earnings of $60 million, or 28 cents per share, during the same period a year ago. Revenue, meanwhile, totaled $8.04 billion, down about 4.6 percent from $8.43 billion during the same period a year ago.
 
Sales at the company have reportedly fallen for three straight years and are projected to drop 4.4 percent to $34.5 billion in its 2013 fiscal year, according to data compiled by Bloomberg.
 
Supervalu is among Minnesota’s five largest public companies based on revenue. It serves customers through a network of approximately 4,400 stores and has about 125,000 employees. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.