Supervalu To Buy Unified Grocers In $375M Deal
Eden Prairie-based Supervalu announced a $375 million deal to acquire Unified Grocers, a wholesale grocery distribution co-op that supplies independent retailers along the Pacific coast.
The purchase will push Supervalu’s wholesale business, which primarily operates in the eastern half of the U.S., into all but four states.
Supervalu will pay $114 million in cash for the outstanding stock of Unified Grocers and assume the company’s $261 million in debt.
The addition of Commerce, California-based Unified Grocers bodes well for Supervalu, which has narrowed its focus recently on the wholesale industry. Last October, Supervalu sold off its discount grocery chain Save-A-Lot and, three years prior, sold its Albertsons chain. Now, the company runs just five retail grocery brands. Cub Foods is the only one with a Minnesota presence.
Competition has amplified within the retail grocery space, particularly in the Twin Cities with established and specialty grocers like Hy-Vee and Fresh Thyme moving into the crowded market. By expanding its stake within the less-crowded wholesale market, Supervalu will look to turn around its business, which hasn’t recorded a year-over-year sales improvement since the fall of 2015.
Supervalu’s wholesale business was nearly twice its retail business last year — about $8 billion compared to $4.8 billion. When factoring in the $3.8 billion in sales Unified Grocers had in 2016, its total sales top $16.5 billion.
“We’re thrilled at the opportunity to bring together these two great organizations,” Supervalu CEO Mark Gross said in a statement. “By acquiring the Unified business, including gaining a wealth of expertise and talent, we will become a stronger and more efficient organization.”
The acquisition is expected to close sometime between mid to late summer. In the first two years, Supervalu anticipates spending $60 million on transition and integration costs. By the third year, it expects that to be saving $60 million annually on operating costs.
News of the purchase lifted Supervalu’s stock to $4 a share, up roughly 6 percent from its Monday close.