Supervalu Inc (NYSE: SVU) has announced a definitive agreement under which it will sell its Albertsons, Acme, Jewel-Osco, Shaw’s, and Star Market stores and related Osco and Sav-on in-store pharmacies to AB Acquisition LLC.
AB Acquisition is an affiliate of a Cerberus Capital Management LP-led investor consortium that also includes Kimco Realty Corporation (NYSE: KIM), Klaff Realty LP, Lubert-Adler Partners, and Schottenstein Real Estate Group. This transaction is valued at $3.3 billion.
The sale will consist of the acquisition by AB Acquisition of the stock of New Albertsons Inc (NAI), a wholly owned subsidiary of Supervalu, which owns the banners, for $100 million in cash. NAI will be sold to AB Acquisition subject to about $3.2 billion in debt, which will be retained by NAI. As part of the transaction, which includes 877 stores across the banners, AB Acquisition-owned Albertson’s LLC will reunite its Albertson’s stores with the acquired NAI Albertsons stores.
Within 10 business days, Symphony Investors, a newly formed acquisition entity owned by the Cerberus-led investor consortium, will conduct a tender offer for up to 30% of Supervalu’s outstanding common stock at a purchase price of $4 per share in cash. The tender offer represents a 50% premium to Supervalu’s 30-day average closing share price as of January 9, 2013, and provides Supervalu shareholders with the opportunity to maintain an equity stake in the firm moving forward.
The transactions described are subject to customary closing conditions, and they are not subject to shareholder approval.
After the transactions close, Supervalu will be headed by grocery retail veteran Sam Duncan as president and chief executive officer, replacing Wayne Sales as president, CEO, and chairman. Five current Supervalu directors will resign. Immediately after the closing of the transactions, the size of the board will be reduced to seven members from the current 10. This seven-member board will consist of five current Supervalu directors and two board members designated by Symphony Investors. One of these is Robert Miller, current president and CEO of Albertson’s LLC, who will serve as non-executive chairman of the board.
After the sale, Supervalu will consist of the independent business, a leading food wholesaler which serves 1,950 stores across the nation; Save-A-Lot, a hard discount grocery chain with about 1,300 stores; and Supervalu’s regional retail food banners Cub, Farm Fresh, Shoppers, Shop ‘n Save, and Hornbacher’s. As such, Supervalu is expected to generate annual revenues in excess of $17 billion.
