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.

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 surprise - 2nd quarter profit!

Supervalu (Acme, Save-A-Lot) announced last week that it posted a $60 million profit for its second quarter, compared to a $1.47 billion loss for the same quarter a year ago. President and CEO Craig Heckert cited game-themed promotions that were successfully tested in Philadelphia-area Acme stores as a contributor to the company's success.

Despite the profit, same-store sales for the quarter were down 1.8% for the quarter compared to the same period one year ago, and total revenues fell 2.6% to $8.4 billion. Through the first half of their fiscal year, Supervalu's net income was $134 million on sales of $19.5 billion. One year ago, the company reported a $1.4 billion loss for the first half of its fiscal year.

Supervalu operates under many banners, including Acme, Save-A-Lot, Albertsons, Cub, Farm Fresh, Hornbacher's, Jewel-Osco, Lucky, Shaw's/Star Market, Shop 'N Save and Shoppers.