Tuesday, November 15, 2011

Supervalu seen by many as prime takeover target

In the last week I've seen the following headlines and stories:

  • Supervalu rumored as takeover target as groceries consolidate (Minneapolis / St. Paul Business Journal)
  • Grocery M&A to rise; Supervalu seen as target (Reuters)
  • Albertsons on its last legs? (LAobserved.com)

According to Thomson Reuters data, dealmaking in the grocery sector is up 34% this year to $2.6 billion, making it the busiest year since 2007.

According to Scott Moses, managing director and head of food, drug and specialty retail investment banking at Sagent Advisors, "Consolidation of grocers of various forms and sizes is almost certain to continue because it's a microeconomic imperative, given the growth of supercenters, club stores and various non-union specialty formats."

As for Supervalu (Acme, Save-A-Lot in the Philly market), the third-largest grocery chain in the country behind Kroger and Safeway, the company is desperately trying to lower its debt that resulted from its $12.4 billion purchase of Albertsons in 2006. Since that time, Supervalu has struggled to both pay down the debt and invest in its own business (not to mention its challenge to compete on price with an ever-increasing list of rivals). Instead, they have turned to layoffs and store closings.

Many industry analysts think Supervalu could sell off assets like the Save-A-Lot chain in order to lower its debt and invest in its traditional grocery stores. Most agree that rivals and equity firms would line up to buy Save-A-Lot, or perhaps even Supervalu's distribution business.

Rumors have also been swirling in the Greater Philadelphia market about a Giant (Ahold) takeover of many of Genuardi's (Safeway) PA and NJ stores.

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