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Investors Break Up Supervalu, Reunite Albertsons

Supervalu has entered into a definitive agreement, it announced, under which it will sell the banners Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market, and related Osco and Sav-on in-store pharmacies. The purchaser is 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.

Following the sale, Supervalu will consist of the independent business including the food wholesaler operation that 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. Supervalu said it expects its newly defined business to generate annual revenues in excess of $17 billion.

At sale completion, Sam Duncan will become president and CEO, replacing current president, CEO and chairman Wayne Sales. Also , five current Supervalu directors will resign. The board size will fall to seven consisting of five current Supervalu directors and two board members designated by Symphony Investors, including Robert Miller, current president and CEO of Albertson’s LLC, who will serve as non-executive board chairman. Following the completion of a search process, the board will grow to 11, with the four new directors to consisting of Sam Duncan, an additional director appointed by Symphony Investors, and two additional independent members to be selected by the initial seven directors.

Under terms of the agreement, the sale will consist of the purchase by AB Acquisition of the stock of New Albertsons, Inc. a wholly-owned subsidiary of Supervalu, which owns the banners and related entities, for $100 million in cash. AB Acquisition will purchase NAI subject to approximately $3.2 billion in debt, which NAI will retained. 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, a newly-formed acquisition entity owned by the Cerberus-led investor consortium will conduct a tender offer for up to 30% of Supervalu’s outstanding common stock. The move will allow Supervalu shareholders to establish an equity stake in the new company moving forward.

In the event that Symphony Investors does not obtain at least 19.9% of the outstanding shares of Supervalu common stock pursuant to the tender offer, Supervalu will issue new shares of common stock to Symphony Investors at the tender offer price to ensure they acquire at least 19.9% of Supervalu’s outstanding common stock prior to the issuance. Supervalu also can issue to Symphony Investors additional new shares of its common stock at the tender offer price subject to an overall cap of $250 million.