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Shaw’s supermarket chain, founded in Portland, sold to investor group in $3.3 billion deal

Bridget Brown | BDN
Bridget Brown | BDN
People walk towards Shaw's supermarket in Ellsworth on Wednesday afternoon, March 31, 2010.
By Olivia Oran and Jessica Wohl, Reuters

Supervalu Inc, the No. 3 U.S. grocery store operator, struck a deal to sell five of its retail grocery chains to an investor group led by Cerberus Capital Management LP, the company said on Thursday.

Supervalu, which also reported a quarterly profit, said it would sell the Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market chains and related Osco and Sav-on in-store pharmacies. The transaction will be valued at $3.3 billion.

Shaw’s — which has 22 stores in Maine — began in Portland in 1860. Today, Shaw’s and Star Market employ approximately 25,000 in every New England state but Connecticut, though the company has experienced several rounds of employee layoffs, including 700 job cuts in November.

The investor group includes real estate firms Kimco Realty Corp, Klaff Realty LP, Lubert-Adler Partners and Scottenstein Real Estate Group.

As part of the deal, a Cerberus-led group will launch a tender offer for up to 30 percent of Supervalu’s common stock at $4 per share, which represents a 50 percent premium to the 30-day average closing share price.

Cerberus will reunite its newly purchased Albertsons stores with those it already owns. Cerberus acquired 655 Albertons locations in 2006.

After the deal, Supervalu’s business will include a food wholesaler serving 1,950 U.S. stores; the discount grocery chain Save-A-Lot, which offers a smaller assortment of low-priced merchandise than a typical grocery store; and the regional grocery chains Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s.

Supervalu said those remaining businesses should generate annual revenue in excess of $17 billion. In the fiscal year ended in February 2012, the company’s total revenue was $36.1 billion.

Goldman Sachs Group Inc and Greenhill & Co Inc advised Supervalu on the transaction. Lazard and Barclays PLC advised Cerberus.

Minneapolis, Minnesota-based Supervalu reported a quarterly profit of $16 million, or 8 cents per share, for the third quarter ended Dec. 1, compared with a year-earlier loss of $750 million, or $3.54 per share.

Excluding an after-tax gain related to a cash settlement from credit card companies and after-tax charges primarily related to store closures, it earned $5 million, or 3 cents per share, in the latest quarter.

Sales fell 5 percent to $7.91 billion.

The company has been losing customers to rival food sellers such as Wal-Mart Stores Inc and Kroger Co, and has been trimming prices in markets such as Chicago to keep up with the competition.

Supervalu’s most attractive asset is considered to be Save-A-Lot, which accounts for about 10 percent of the company’s overall sales. Its other grocery stores contribute 65 percent of total revenue, while its grocery distribution business contributes 20 percent.

Supervalu’s grocery stores reported a 4.5 percent decline in sales at identical stores in the latest quarter. The company defines that measure as sales at supermarkets operating for four full quarters, including store expansions, and excluding fuel sales.

Identical store sales at Save-A-Lot declined 4.1 percent.

Supervalu expects to trim about $400 million of debt this fiscal year, and sees capital spending of about $500 million, including plans for new Save-A-Lot stores and about 40 store remodels.

The Times Record contributed to this report.


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