Home » Supervalu To Sell Five Retail Grocery Banners

Supervalu To Sell Five Retail Grocery Banners

Supervalu Duncan and Miller

Eden Prairie, Minn.-based Supervalu announced this morning 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, an affiliate of a Cerberus Capital Management L.P.-led investor consortium that also includes Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners and Schottenstein Real Estate Group, in a transaction 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 approximately $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.

In addition to the sale, within 10 business days of today, a newly-formed acquisition entity owned by a Cerberus-led investor consortium (Symphony Investors) will conduct a tender offer for up to 30 percent of Supervalu’s outstanding common stock at a purchase price of $4 per share in cash. The tender offer represents a 50 percent premium to Supervalu’s 30-day average closing share price as of Jan. 9, and provides Supervalu’s shareholders with the opportunity to maintain an equity stake in Supervalu moving forward.

In the event that Symphony Investors does not obtain at least 19.9 percent of the outstanding shares of Supervalu common stock pursuant to the tender offer, Supervalu will be obligated to issue new shares of common stock to Symphony Investors at the tender offer price such that after giving effect to the tender offer and the issuance, Symphony Investors would own a number of shares representing at least 19.9 percent of Supervalu’s outstanding common stock prior to the issuance. Supervalu also will have the option to issue to Symphony Investors additional new shares of Supervalu common stock at the tender offer price, subject to: an overall cap of $250 million on Symphony Investors purchase of common stock pursuant to the tender offer, the issuance and the optional issuance; and a total issuance of primary common shares of not more than 19.9 percent.

The transactions described above are subject to customary closing conditions. The closing of the sale also is conditioned on among other things, the satisfaction of the conditions to the tender offer process, and the closing of Symphony Investors acquisition of Supervalu common stock pursuant to the tender offer process is conditioned on, among other things, closing of the sale. Closing of the sale and the tender offer process is expected to occur in the first calendar quarter of 2013. The transactions are not subject to shareholder approval.

Management and governance

Following the closing of the transactions, Supervalu will be headed by grocery retail veteran Sam Duncan, as president and CEO, replacing current president, CEO and Chairman, Wayne Sales. In addition, effective upon the closing of the transactions, five current Supervalu directors will resign. Immediately following the closing of the transactions, the size of the board will be reduced to seven members from the current 10 members. This seven member board will consist of five current Supervalu directors and two board members designated by Symphony Investors, one of whom is Robert Miller, current president and CEO of Albertson’s LLC, who will serve as non-executive chairman of the board. Following the completion of a search process, the board will be increased to a size of 11 directors, with the four new directors to consist of Sam Duncan, additional director appointed by Symphony Investors and two additional independent board members to be selected by the initial seven directors.

The new Supervalu

Following the sale, Supervalu will consist of the independent business, a leading food wholesaler which serves 1,950 stores across the country; Save-A-Lot, the largest hard discount grocery chain in the United States, with approximately 1,300 stores; and Supervalu’s leading 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. Key elements of Supervalu’s go-forward business plan include continued focus on right-sizing operations and maximizing efficiencies across the company.


In connection with the transactions, Supervalu has negotiated a new and fully underwritten $900 million asset based revolving credit facility led by Wells Fargo and a $1.5 billion term loan secured by a portion of the company’s real estate and an equity pledge of Moran Foods LLC (the parent entity of the Save-A-Lot business) led by Goldman Sachs Bank USA, Credit Suisse, Morgan Stanley, Bank of America Merrill Lynch and Barclays. The proceeds of these financings will be used to replace the existing $1.65 billion asset-based revolving credit facility, the existing $846 million term loan, and to call and refinance $490 million of 7.5 percent bonds scheduled to mature in November 2014.

Wayne Sales: Successful culmination of strategic review process; ongoing Supervalu operations better positioned for future

In commenting on the definitive agreement, Sales said: “The transactions announced today represent the successful culmination of the in-depth strategic review process we commenced this past summer. Following the Sale, Supervalu will have three strong, market-leading business units with more consistent cash flows and improved EBITDA growth potential. Symphony Investors’ tender offer provides our shareholders with an attractive premium to recent trading values of our shares and they will acquire an equity stake in a newly refocused Supervalu with solid long-term prospects. At the same time, the stores being sold to AB Acquisition are complementary to Albertson’s LLC’s current operations, which are focused primarily on traditional retail grocery.”

Duncan said: “I am excited by the opportunity to lead Supervalu. The company has very solid market positions and I see great potential in our ability to successfully build on each of these three core businesses.

“The independent business is one of the largest food wholesalers in the United States, serving many of the country’s most successful independent operators. Save-A-Lot is the nation’s largest hard discount grocer, providing the company an important presence in this fast growing segment of food retail. Additionally, the company’s streamlined retail operation consists of five strong regional banners. I’m looking forward to working with Supervalu’s team members to quickly and effectively improve the company’s business.”

Miller said: “As chairman of Supervalu’s reconstituted board, working closely with Sam Duncan and the Supervalu management team, we will focus on strengthening the company’s market leading positions and delivering compelling value to our shareholders. Sam, whom I had the pleasure of working with at Fred Meyer, is an extremely talented retail executive, with more than 40 years of experience in retail, including turnarounds. He is well positioned to build upon the foundation Wayne Sales laid for improved performance. In addition, the acquisition by Symphony Investors of up to 30 percent of the company is a strong vote of confidence in the future of Supervalu. I share their strong belief in the company’s future potential.”

“We are pleased to be making this investment and look forward to helping build long-term value for all stakeholders,” said Lenard Tessler, co-head of global private equity and senior managing director at Cerberus. “We believe these transactions will create stronger, more competitive businesses.”

Sam K. Duncan, incoming CEO and president

Sam Duncan, 61, a successful executive with more than 40 years of retail experience, has been named incoming CEO and president of Supervalu Inc., a position he is expected to assume in late February.

Duncan most recently served from 2005-2011 as chairman, CEO and president of OfficeMax, the third-largest office supplies retailer in North America with more than $7 billion in revenues and more than 1,000 stores in the United States, Mexico, Puerto Rico and the U.S. Virgin Islands. In addition to retail, Duncan also oversaw the company’s business-to-business sales and service divisions in Canada, Australia and New Zealand.

Prior to joining OfficeMax, Duncan served from 2002-2005 as president and CEO of ShopKo Stores, a $3 billion Midwest retailer. In both these leadership roles, Duncan successfully led publicly-traded companies through growth and financial improvement efforts, resulting in stronger organizations and improved shareholder value.

Duncan has an extensive background in the grocery industry. He began his career at Albertsons as a courtesy clerk at the age of 15. During the next 19 years, he held various positions of increasing responsibility with Albertsons before moving to Fred Meyer, a division of Kroger, in 1992 as VP of grocery. He was eventually appointed president of the Fred Meyer division. Duncan also served from 1998-2001 as president of Ralph’s Supermarket, one of the largest food retailers in Southern California.

Duncan and his wife of 42 years, Sylvia, reside in Portland, Ore. They have three daughters and five grandchildren.

Robert G. Miller, incoming chairman of the board

Bob Miller has spent more than 50 years in retailing with an impressive track record of improving the financial and operating performance of both public and private corporations, as well as leading troubled companies back to health.

He currently serves as the CEO of Albertson’s LLC, a North American grocery company with approximately 192 retail grocery and drug stores in eight states. Retail operations are supported by two major company distribution operations. Albertson’s LLC is majority-owned by Cerberus Capital Management, one of the world’s leading private investment firms specializing in turning underperforming companies into industry leaders.

Prior to joining Albertson’s in 2006, Miller was chairman of the board of Wild Oats Markets based in Boulder, Colo., from December 2004 through 2006.

In December 1999, Miller was hired as chairman and CEO of Rite Aid Corp., the country’s third largest drugstore chain, where from December 1999 to June 2003 he led a successful turnaround of the nearly-bankrupt company. He continued to serve as chairman of Rite Aid until June 2007 and a director until 2011.

Before joining Rite Aid, Miller was vice chairman and ÇOO at The Kroger Co., which he joined in May 1999 when the company acquired the food and drug retailer Fred Meyer Inc. Miller served as Fred Meyer Inc. chairman and CEO from 1991 to 1999.

Starting his career at Albertson’s Inc., a retail food and drug chain, Miller spent 30 years working his way up the ranks from store manager to EVP of retail operations.

He currently also serves on the board of directors of Albertson’s LLC, Nordstrom Inc, Jim Pattison Group, U.S. Bakery, and Jo-Ann Fabrics and Crafts. A native of Louisville, Miss., he attended Orange Coast College in Costa Mesa, Calif., and the Executive Management Program at Stanford University’s Graduate School of Business. He is married with three sons.

In the featured photo at top is Sam Duncan, left, and Robert Miller.



About the author

Kristen Cloud

A former newspaper editor and publisher, she once enjoyed leisurely perusing the grocery store aisles but, since having a baby in 2016, she is now an enthusiastic click-and-collect shopper.


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