Supervalu Deals Save-A-Lot To Onex Corp.

Supervalu has entered into a definitive agreement with an affiliate of private equity firm Onex Corp. to sell its Save-A-Lot discount grocery business for $1.37 billion in cash.

The company stated that it expects completion of the Save-A-Lot sale to close by January 31, 2017. In connection with the sale, Supervalu and the Onex Save-A-Lot operation are entering into a five-year professional services agreement.

Under the terms of the professional services agreement, Supervalu maintained, it will provide Save-A-Lot with services and support functions for its day-to-day operations. The functions include merchandising technology, payroll and finance, as well as other services.

Supervalu noted that it expects to use net proceeds from the sale to prepay at least $750 million of its outstanding term loan balance. The company intends to use the remaining proceeds to further reduce debt and improve its capital structure, as well as to fund corporate and growth initiatives.

“Today’s announcement is the result of a thorough process to maximize the value of the Save-A-Lot business and best position Supervalu for future success,” said Jerry Storch, Supervalu non-executive chairman of the board. “Supervalu is successfully executing on its long-term strategic vision and positioning the company for continued growth and value creation. We are confident that this transaction will create exciting opportunities for both Supervalu and Save-A-Lot.”

Save-A-Lot operates 1,368 stores, of which 896 are operated by licensee owners.