United Natural Foods to acquire Supervalu

United Natural Foods announced that it plans to acquire Supervalu for $2.9 billion in cash. According to Supermarket News, the deal would create a large, diverse food distributor serving traditional grocery stores via Supervalu, and natural/organic product retailers though United Natural Foods, whose primary customer is Whole Foods.

The acquisition is expected to result in Supervalu's exit from the grocery retail business. Supervalu operates 114 supermarkets under the Cub Foods, Hornbacher's and Shoppers banners. Save-A-Lot had been owned by Supervalu until 2016 when it was acquired by Onex Corporation.

In recent years Supervalu has struggled to compete with larger grocery companies and online food retailers, and as a result has stepped up its wholesale operations. Wholesaling now accounts for 78% of total sales, up from about 44% two years ago. The company's wholesale arm serves a network of 3,437 stores.

The deal is expected to close in the fourth quarter of this year.

Supervalu's customer data hacked for second time in six weeks

Supervalu experienced a security breach in its data systems for the second time in six weeks, the company said yesterday. According to the company, an intruder installed malware into the portion of its computer network that processes payment-card transactions for some of its retail customers.

Supervalu does not believe the intrusion succeeded in capturing data from any payment cards used at any stores other than four Cub Foods stores in Minnesota. The company has not determined if any cardholder data was stolen, but as a precaution it has offered customers who used payment cards complimentary consumer identification protection services.

Cerberus to invest in Supervalu, install new leadership

Only a couple weeks after a group led by Cerberus Capital Management agreed to buy five Supervalu grocery chains for $3.3 billion, an investment group led by Cerberus is scheduled to take control of 20-30% of Supervalu and install a new executive leadership group.

According to Neil Stern, a senior partner at McMillanDoolittle, it's a good deal for Supervalu "because it makes it a more viable company in the long run (by turning) the clock back to where it was in 2006, before the Albertsons acquisition, and it will now be clearer how the company is performing."

Once the deal is done, Supervalu will continue to:

• Operate as a wholesale distributor;
• Own or license the Save-A-Lot chain;
• Own the 184 stores operating as Cub Foods, Shoppers Food & Pharmacy, Farm Fresh, Shop 'n Save and Hornbacher's.

In addition, Sam Duncan will become Supervalu's president and chief executive officer. He has previously served in similar capacities at OfficeMax, ShopKo Stores, Fred Meyer and Ralphs Grocery Co.

According to analysts, Supervalu will have to develop a new organizational structure, cut costs, turn Save-A-Lot around and devise a long-term financial plan for the company.

Many believe the company's success will be driven by Save-A-Lot, as traditional grocery stores have more limited growth prospects.

Related story: Supervalu sells Acme and four other brands; Kimco in on the deal

Supervalu fires CEO

Craig Herkert, Supervalu's CEO since May 2009, was fired yesterday and replaced by Board Chairman Wayne Sales. Herkert had been under fire by industry experts and journalists for much of his tenure at Supervalu (Acme, Save-A-Lot in the Philly region), and last week the company made news for its announcement that it would explore selling all or parts of the company, in addition to making significant expense cuts.

Sales is credited with turning around Canadian Tire, where he served as CEO from 2000 to 2006. He said yesterday he would take immediate steps to improve sales and cut costs at Supervalu, while improving relationships with Save-A-Lot licensees.

In addition to Acme and Save-A-Lot, Supervalu brands include Albertsons, Jewel-Osco, Shaw's, Cub Foods and Shoppers.

The end may be near for Supervalu, Acme

Yesterday the board of directors for Minneapolis-based Supervalu (Acme, Save-A-Lot) said they are considering the sale of all or parts of the company, and will significantly cut expenses and capital spending.

The announcement came after Supervalu's financial results for its most recent quarter fell below expectations. The company's net earnings of $41 million were down 45% from the same period last year.

According to company leadership, fiscal 2013 capital expenditures would be reduced from previous estimates of $675 million to $450-$500 million, and operating expense cuts of $250 million can be expected over the next two years. In addition, Supervalu has suspended its dividend and replaced its current credit facility with a real estate backed loan.

In a conference call yesterday with analysts, CEO Craig Herkert said the company was not considering bankruptcy, but analysts believe it's a possible scenario considering the difficulty Supervalu will most likely face when trying to find a buyer.

Save-A-Lot, Supervalu's "limited-assortment" brand, is the banner analysts believe would be most attractive to a buyer. Other Supervalu brands include Albertsons, Jewel-Osco, Acme, Shaw's, Cub Foods and Shoppers.