Why SUPERVALU Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: SUPERVALU (NYSE: SVU  ) shares shot up as much as 14% today after the struggling supermarket chain completed its deal to sell $3.3 billion worth of assets to Cerebrus Capital Management.

So what: Supervalu will sell off five of its supermarket chains to the Cerebrus investing group, including Albertson's, Acme, Jewel-Osco, Shaw's, and Star Market, as well as in-store pharmacies Osco and Sav-on. Cerebrus will pay Supervalu $100 million in cash, and assume $3.2 billion in debt. Supervalu had nearly $6.2 billion in debt as of its last earnings report, so the Supervalu sale would seem to alleviate some of its interest burden and allow it to focus on its Sav-A-Lot stores and smaller local chains.

Now what: The sale will cut Supervalu's annual sales essentially in half, to $17 billion, but the company, which had posted quarterly losses repeatedly and suffers under a huge debt burden, had it’s a back against the wall. In a statement, Supervalu said the move makes it a "more efficient wholesale and retail company." While today's sale is no guarantee of a turnaround, it does offer investors some hope, which is more than the company merited before. It's still a long road back to financial health for Supervalu, but this seems to be a good first step.

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