Supervalu Inc. has agreed to sell its four largest conventional supermarket chains to an investor group led by Cerberus Capital Management -- a deal valued at $3.3 billion -- while Cerberus also plans to buy up to 30 percent of the embattled grocery giant's stock for $4 per share.
With the deal, Eden Prairie-based Supervalu will remain an independent, publicly-traded company, albeit a far smaller one.
Cub Foods, the Twin Cities largest grocery chain, will remain under Supervalu's ownership, and the company will retain its wholesale business, which has a large warehouse in Hopkins.
Supervalu said Thursday that a Cerberus-led investor group will pay $100 million for Albertsons, Acme, Jewel, and Shaw's/Star Markets, and take on $3.2 billion in Supervalu's debt. The deal inclues 877 Supervalu stores.
Save-A-Lot, a national discount grocery chain, will remain with Supervalu, as will four other regional grocery chains besides Cub. The Cerberus investor group includes Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners and Schottenstein Real Estate Group. Cerberus is a large New York-based private equity firm.
A Cerberus-led group will conduct a tender offer for Supervalu stock at $4 per share, a 50 percent premium to its average closing price over the thirty days prior to Jan. 9. Supervalu's stock was trading at $3.52 Thursday morning, up 47 cents or 16 percent.
In 2012, Supervalu's stock hit lows not seen in at least 30 years, as the company continued to fight a losing battle against lower-priced competitors in a tough economy. In July, Supervalu announced a "strategic review" of its assets -- i.e. a sale of all or parts of the company.
"The transactions announced today respresent the successful culmination of the in-depth strategic review process we commenced last summer," Supervalu CEO Wayne Sales said in a press statement.
Sales, installed as CEO in July, will be replaced by Sam Duncan, a grocery retail veteran. Sales, the retired CEO of a major Canadian retailer, had been chairman of Supervalu's board when he was named CEO to replace the ousted Craig Herkert.
When the Cerberus deal closes, five current Supervalu directors will resign and the board will be reduced from 10 members to seven members. The new board will consist of five current Supervalu directors and two appointed by a Cerberus affiliate.
The deal with Cerberus effectively undoes the $12 billion megadeal Supervalu did in 2006 when it bought most of Albertsons. With that transaction, Supervalu gained Albertsons stores in southern California, Las Vegas and the mountain west. Albertsons' became its biggest chain.
The 2006 deal also gave Supervalu Jewel, metro Chicago's biggest supermarket operator, and Acme and Shaw's/Star Markets, respectively big players in Philadelphia and New England. But that deal also saddled Supervalu with a big debt load.
As the economy deteriorated after the 2008 recesssion, and competition from the Wal-Marts of the grocery world intensifed, Supervalu increasingly fell behind, losing market share. With its large debt, it lacked the ability to swiftly cut prices and invest in its stores as much as was needed.
The new deal will unite all of Albertsons stores under common ownership. In the 2006 deal for Albertsons, Supervalu picked up 569 Albertsons outlets, while a group led by Cerberus bought 655 of Albertsons underperforming stores, eventually selling off more than 400 of them.
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