UNFI Acquires SuperValu for $2.9 Billion

Is the ongoing clash between investor Blackwells Capital and SuperValu finally water under the bridge? Quite possibly following United Natural Foods’ (UNFI) acquisition of SuperValu. This week, UNFI announced it has entered into a definitive agreement to acquire SuperValu for $2.9 billion, paying $32.50 per share in cash—a 67 percent premium over SuperValu’s closing price Monday, according to Business Journal.

“The combination of UNFI and SuperValu provides a substantial premium and delivers certainty of value to our stockholders, meaningful benefits to our customers, expanded opportunities for our employees, and the ability for us and our vendors to efficiently serve a varied customer base,” said SuperValu’s Chief Executive Officer Mark Gross, in a press release. “We have been executing an ambitious strategic transformation for over two years. We believe that this transaction is the best and natural next step for our stockholders, customers, and employees. I am very proud of the unwavering commitment and focus of our employees in driving our strategic transformation and serving our customers. I am confident that, together, SuperValu and UNFI will be well positioned to succeed—and to help our customers succeed—in today’s grocery landscape.”

As part of the acquisition, Supervalu will no longer operate its retail business. Instead, the two companies expect $175 million will be realized in “cost synergies” over the first three years, with other compelling strategic and financial benefits coming to fruition as well, including:

• Diversifying its customer base
• Enabling cross-selling opportunities
• Expanding market reach and scale
• Enhancing technology, capacity, and systems
• Delivering significant synergies
• Accelerating growth

“This transaction accelerates UNFI’s ‘Build out the Store’ growth strategy by immediately enhancing our product range, equipping us to bring an attractive, comprehensive product portfolio to an expanded universe of customers,” said UNFI’s Chief Executive Officer and Chairman Steve Spinner. “Combining our leading position in natural and organic foods with SuperValu’s presence in fast-turning products makes us the partner of choice for a broader range of customers. Together, we can provide our ‘better for you’ products as well as other high-growth segments, improving customers’ competitive advantages in a dynamic marketplace. These benefits, plus our increased efficiency and productivity, will enable us to create value for our shareholders, enhance opportunities for our suppliers, provide a broader assortment for our customers, and create new prospects for our associates over the long term.”

Just this last year, SuperValu reported, in its first quarter fiscal 2019 results, that it has successfully closed the sale and leaseback of seven owned distribution centers, completed the exit of its Farm Fresh banner after selling 21 stores to Harris Teeter, Kroger, and Food Lion, and announced its intent to sell its Shop ‘n Save retail operations. In addition, SuperValu reported:

• Consolidated net sales of $4.76 billion increased $1.24 billion, or 35 percent, including $1.34 billion from Unified Grocers and AG Florida
• Wholesale net sales of$3.81 billion increased $1.26 billion, or 49 percent
• Retail identical store sales of positive 0.4 percent
• Net loss of $27 million compared to net earnings of $9 million last year
• Adjusted net loss of $7 million compared to adjusted net earnings of $21 million last year
• Adjusted EBITDA of $98 million compared to Adjusted EBITDA of $118 million last year
• Total outstanding net debt, including capital leases, of $1.56 billion, a reduction of $305 million since the end of fiscal 2018

For the full details of UNFI’s latest acquisition or of SuperValu’s financial report, click here and here.

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