SUPERVALU Inc. announced last week a definitive package in which it will sell five of its supermarket systems to AB Acquisition LLC, an affiliate of Cerebus Capital Management LP, in a transaction valued at $3.3 billion.
Supervalu chair, chief executive officer and president Wayne Sales said the agreement represents "the successful culmination" of an in-depth, strategic review that was commenced last summer (Feedstuffs, July 23, 2012).
The company has struggled with declining customer traffic due to a pricing structure that was higher than its competitors, including conventional supermarkets, dollar stores, warehouses and even restaurants. It also has struggled with a mountain of debt, much of which could be traced to its acquisition of Albertsons in 2006 and kept it from implementing price points that could match competitors.
In the announcement last week, Supervalu said it had restructured its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market banners into an entity named New Albertsons Inc., housing 877 stores across the U.S.
In the transaction, AB Acquisition will acquire New Albertsons for $100 million in cash and will assume $3.2 billion of New Albertsons debt, according to the agreement. The debt pickup represents about half of Supervalu's total debt.
Additionally, the agreement calls for a Cerebus-led consortium of real estate and realty firms to conduct an offer for up to 30% of Supervalu's common stock for $4 per share, a 50% premium to Supervalu's 30-day average closing price as of Jan. 9, the day prior to the announcement.
The deal is subject to customary closing conditions but is scheduled to close in the current first quarter.
Supervalu will continue to operate its food wholesale distribution business, which is one of the largest in the U.S. and serves almost 2,000 supermarkets across the U.S., and also will continue to operate its Cub, Farm Fresh, Shoppers, Shop & Save and Hornbacher's banners, as well as its Save-A-Lot discount grocery stores.
As such, Supervalu will have sales totaling $17 billion.
The company also noted that grocery retail veteran Sam Duncan will succeed Sales as chair, CEO and president following the close of the transaction and that the board of directors will be restructured.
Duncan, 61, has more than 40 years of experience in retailing. He began his career at Albertsons as a clerk at the age of 15 and held numerous positions of increasing responsibility at Albertsons for 19 years. He subsequently became president of the Fred Meyer division of The Kroger Co., president of Ralph's Supermarkets and CEO and president of ShopKo Stores.
Supervalu, headquartered in Eden Prairie, Minn., was the fifth-largest supermarket system in the U.S. and had 2011 sales totaling 37.5 billion.
Cerebus, headquartered in New York, N.Y., has more than $20 billion invested in its core interests.