Cerberus Affiliate Buying 5 SUPERVALU Supermarket Chains, Taking Equity Stake

This morning, SUPERVALU (NYSE: SVU  ) announced that it has reached a definitive agreement to sell five retail grocery chains with 877 stores to an investor consortium led by private equity buyer Cerberus. The news sent SUPERVALU shares soaring more than 17% in early trading, to a price of $3.56 as of this writing.

Chains Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores, and also the Osco and Sav-on in-store pharmacies, will all be sold to a Cerberus-led coalition of investors that includes Kimco Realty (NYSE: KIM  ) , Klaff Realty, Lubert-Adler Partners, and Schottenstein Real Estate Group, in a transaction valued at $3.3 billion.

SUPERVALU will first create a subsidiary called New Albertsons, and then sell it to the buyers for $100 million cash. New Albertsons will also take on $3.2 billion of the previous SUPERVALU's debt (resulting in the $3.3 billion total valuation).

Speaking of old SUPERVALU, a second part of the deal has Cerberus and a second group of investors, called Symphony, making a $4-per-share tender offer to buy up to 30% of the shares of what's left of SUPERVALU after the divestiture of New Albertsons. This tender offer will be made within the next 10 business days. The tender offer represents a 50% premium to SUPERVALU's 30-day average closing share price as of Jan. 9, according to the company.

The $4 price is conditioned on at least 19.9% (two-thirds of the 30% being sought) of SUPERVALU shareholders tendering their shares for purchase. If not enough shareholders tender their shares, SUPERVALU will itself issue and sell new shares (at $4 apiece) to Symphony in sufficient quantity to give Symphony at least a 19.9% stake in the company.

Post-transaction, rump SUPERVALU will consist of " the Independent Business, a leading food wholesaler which serves 1,950 stores across the country; Save-A-Lot, the largest hard discount grocery chain in the United States, with approximately 1,300 stores; and SUPERVALU's leading regional retail food banners Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's." Management puts the annual revenue of its rump business at $17 billion.

Also following the transaction, grocery retail veteran Sam Duncan will replace Wayne Sales as president and CEO of SUPERVALU and five current SUPERVALU directors will resign, the company said.

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  • Report this Comment On January 10, 2013, at 11:23 AM, joanyh wrote:

    Who will own the Lucky banner?

    Lucky was tied up in litigation for a long time; it is closely associated with Alberstson's and the other stores Cerberus is buying but I don't see it listed.

  • Report this Comment On January 10, 2013, at 12:26 PM, TMFDitty wrote:

    Doesn't say, but if it's not listed as being sold, it has to remain part of rump Supervalu.

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