Private equity firm to buy Save-A-Lot for $1.365 billion

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.

Private equity firms reportly planning to bid on Save-A-Lot

A recent Reuters report stated that several private equity firms plan to bid on Save-A-Lot, currently a Supervalu banner, in the coming weeks. If the report is accurate, it is not likely that the discount grocer would be spun off as a public entity, as many thought it would.

Reuters' anonymous sources named Advent International; KKR; Clayton, Dubilier & Rice; TPG Capital; Onex Corp., and Thomas H. Lee Partners as potential bidders that could go as high as $1.8 billion.