Supervalu Completes $3.3B Deal to Sell 5 Grocery Brands

Following the sale, Supervalu will have annual sales of about $17 billion; meanwhile, the buyer, an affiliate of Cerberus Capital Management, will become the company’s largest shareholder, with 21.2 percent of outstanding common shares.

Supervalu, Inc., said Thursday that it has completed the previously announced sale of five of its largest retail grocery brands through a deal valued at $3.3 billion.
The transaction, which includes $100 million in cash and $3.2 billion in the assumption of debt, includes the sale of 877 Albertsons, Acme, Jewel-Osco, Shaw’s, and Star Market stores, as well as the associated Osco and Sav-on in-store pharmacies. Supervalu announced the deal in January.
The buyer is an affiliate of an investor consortium led by New York-based private investment firm Cerberus Capital Management L.P.
Operations for the five brands being sold will transfer overnight Thursday, and the new Supervalu will open for business Friday as a company whose annual sales total roughly $17 billion. Supervalu is currently Minnesota’s fourth-largest public company based on revenue, which totaled $36.1 billion in the fiscal year that ended in February 2012.
The new Supervalu will consist of three business units: independent business, a food wholesaler that serves nearly 2,000 stores across the country; Save-A-Lot, a discount grocery chain that has more than 1,300 stores in the United States; and regional banners Cub Foods, Farm Fresh, Shoppers, Shop ‘n’ Save, and Hornbacher’s.
As part of the transaction, the Cerberus-led consortium completed a tender offer to shareholders that resulted in the acquisition of about 11.7 million shares—or nearly 5.5 percent—of Supervalu’s outstanding common stock for $4 per share in cash, or $46.7 million. Additionally, Supervalu issued roughly 42.5 million new shares of outstanding common stock to the consortium for $4 per share in cash, or approximately $170 million.
The tender offer and stock issuance make the Cerberus-led group Supervalu’s largest shareholder. It now holds 21.2 percent of total outstanding common shares.
“The successful completion of this transaction marks a significant milestone for Supervalu and our shareholders, customers, and employees,” President and CEO Sam Duncan said in a statement. “As we move forward, Supervalu will continue as one of the largest wholesale grocery providers in America serving nearly 2,000 independent retailers in 43 states.”
Duncan, who took the helm in February, added that the company plans to grow its Save-A-Lot chain of more than 1,300 stores nationwide.
Shares of Supervalu’s stock were trading up about 7.4 percent mid-Thursday morning at $4.50.
Struggling Supervalu—which last year closed stores and cut jobs in a major turnaround effort—began “exploring strategic alternatives,” including a possible sale, in July. It now employs about 35,000 individuals.
Several changes to Supervalu’s board are taking place in conjunction with the completion of the Cerberus deal. Robert Miller, president and CEO of Albertsons LLC, will become the company’s new, non-executive chairman of the board. He replaces Wayne Sales, who has served as executive chairman since August and served as Supervalu’s CEO until Duncan succeeded him last month.
Sales will remain a director along with four other current board members: Donald Chappel, Irwin Cohen, Philip Francis, and Matthew Rubel. Under the terms of a previous agreement made by Supervalu and the Cerberus-led consortium, five directors voluntarily resigned from the board, effective Thursday: Ronald Daly, Susan Engel, Edwin “Skip” Gage, Steven Rogers, and Kathi Seifert.
Meanwhile, Lenard Tessler, co-head of global private equity and senior managing director of Cerberus Capital Management, was appointed to the board, and the new board will identify two additional independent directors. After they’ve been identified, Duncan and Mark Neporent, chief operating officer and general counsel for Cerberus Capital Management, will also join the board—thus boosting its size to 11 members.