Roulston Retail Partner Maggie Gilliam on SUPERVALU to Break Up

February 12, 2013

SUPERVALU Inc. has announced a definitive agreement under which it will sell 877 stores, consisting of its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market banners and related Osco and Sav-on in-store pharmacies to AB Acquisitions LLC, an affiliate of a Cerberus Capital Management L.P. led investor consortium that includes Kimco Realty Corporation, Klaff Realty LP, Lubert-Adler Partners and Schottenstein Real Estate Group, in a transaction valued at $3.3 billion, consisting of $100 million in cash and $3.2 billion in debt. Subsequently, a cash tender offer was initiated by Symphony Investors, another Cerberus-led investor consortium, for 30% of the outstanding stock at $4.00 per share. The sale will unite most of the former American Stores Corporation by combining the divested banner with Albertsons LLC, an affiliate of Cerberus.

SUPERVALU will retain businesses with aggregate sales of $17 billion, consisting of:

  • Independent Business Division serving 1,950 independent retailers, with 47% of go-forward revenues,
  • Save-A-Lot, the largest discount grocer with 1,300 stores and 25% of go-forward sales, and
  • The remaining 191 stores in “stable, market- leading chains,” including Cub, Farm Fresh, and others, and 28% of sales.

 Essentially, SUPERVALU will be stripped back to what it once was before it got seriously into retailing with the American Stores acquisition. We never particularly cared for the food wholesale business with its customers’ competitive exposure to the growth of Wal-Mart and the industry’s consolidation. However, now that Wal-Mart has covered a good portion of the geography of SUPERVALU’s customers, the situation looks improved. Furthermore, the company has enlightened leadership today. The newly named CEO, Sam Duncan, was CEO of OfficeMax from 2005 to 2011, and CEO of ShopKo Stores, from 2002 to 2005, and prior thereto, he spent nearly 30 years with Albertsons and Kroger in positions of increasing responsibility. The non-executive chairman will be Bob Miller, who is President & CEO of Albertsons LLC, who is a very experienced retail executive with an impressive track record, and whom we regard highly. We had high hopes for SUPERVALU after it acquired American Stores, buy putting it together proved too difficult for the players involved. Now, hopefully, something will be made of the newly separated pieces.

Gilliam & Co. is an independent research and advisory firm, specializing in retailing and related fields, and providing consulting and advisory services for both businesses and investors. The company publishes the Gilliam Viewpoint®, a monthly synopsis of current topics, with particular attention towards their longer-term significance, and intended to be an extension of Wall Street Research. This publication is supplemented with timely updates for subscribers on our Website. This article is taken from February’s issue of the Viewpoint and if you are interested in subscribing please visit http://gilliamco.com/?page_id=183.

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