Tuesday, October 23, 2012

Potential buyer rumored for Supervalu as company posts earnings loss

It was widely reported yesterday that Cerberus Capital Management may make a bid for struggling grocery giant Supervalu, whose banners include Acme and Save-A-Lot in the Philadelphia market, and Albertson's, Jewel-Osco and others around the country.

Cerberus is a private equity firm established in 1992 that has made investments in distressed companies like Chrysler, and partnered with Supervalu in 2006 to purchase the Albertson's chain. The word is that Cerberus is in the process of lining up $4 - $5 billion in financing for the Supervalu  bid. A list of the company's recent transactions and notable acquisitions can be found here.

(Interesting note - former Vice President Dan Quayle is Chairman of Cerberus Global Investments, LLC.)

Last week Supervalu announced a $111 million loss for its fiscal second quarter, mostly due to non-cash charges for asset impairment and previously announced store closings. Sales for the quarter declined 4.6% compared to the same quarter last year, and same-store sales fell 4.3%.

Save-A-Lot posted earnings of $18 million for the quarter, which included $16 million in pre-tax charges related to store closures. Excluding those costs, Save-A-Lot operating earnings were $34 million, significantly less than $50 million from the same quarter last year.

Operating earnings for Supervalu's wholesaling division, which serves independent retailers, were down 10.7% to $50 million on a sales increase of 1.1% to $1.87 billion.

Supervalu's stock price rose significantly yesterday on news of the potential buyer as well as an upgrade to "Neutral" by JPMorgan. 

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