Supervalu announced yesterday that it has entered into an agreement with private equity firm Onex Corp. to sell Save-A-Lot for $1.365 billion. The deal is expected to close by January 31, 2017.
Supervalu and Onex also announced that they have entered into a five-year agreement where Supervalu would continue to provide support for Save-A-Lot, including merchandising technology, payroll, finance and other functions.
Analysts had predicted the sale price would be higher.
Company officials said that Save-A-Lot's results had suffered recently as a result of reduced SNAP benefits and product price deflation. The discount grocery chain currently accounts for about a third of Supervalu's business.
Supervalu said yesterday that proceeds from the deal would be used to reduce debt and improve its capital structure, and to fund operations and growth. The sale is another major step in the company's transformation into a wholesale-focused company.