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.

Supervalu freezes pay, lays off workers as buyer conducts due diligence

Supervalu, the troubled supermarket chain whose banners in the Philadelphia region include Acme and Save-A-Lot, announced last week it would implement a pay freeze for all employees at its corporate headquarters in Minneapolis, MN. The company said it will also reduce or suspend matching contributions to employees' 401(k) plans starting next year.

Earlier in the month Supervalu announced that the company would layoff 700 people, or approximately 4% of the workforce, at Shaw's and Star Market, both of which operate in New England.

In the mean time, Cerberus Capital Management, which is in talks to buy Supervalu, is still conducting its due diligence. The two companies are familiar with each other, as Cerberus joined Supervalu in buying a stake in Albertson's in 2006. According to published reports, Cerberus currently owns the entity that operates 205 Albertson's stores, while Supervalu operates 564 of them.

Supervalu, which operates Shoppers, Bristol Farms, Cub and Jewel-Osco in addition to the banners mentioned above, has lost more that $2.5 billion over its past two fiscal years, and recently reported its 14th straight quarterly sales decrease. It is the third largest grocery chain in the United States behind Kroger and Safeway.

It has been reported that private equity firms KKR and TPG Capital have expressed interest in purchasing Supervalu, as well as billionaire Ron Burkle.

Supervalu attracting buyers for parts, not the whole

A Bloomberg story reported last week that Supervalu (Acme & Save-A-Lot in the Philadelphia market) has attracted buyers that are interested in parts of the company rather than the whole. Supervalu prefers to sell the entire company, and has extended the deadline for offers past the original October 15 deadline. It has been working with Goldman Sachs and Greenhill & Co. to find a buyer since mid-summer.

Bloomberg's sources say that KKR & Co., TPG Capital, Cerberus Capital Managment LP and billionaire Ron Burkle have expressed interest. Burkle and his company, Yucaipa Cos., helped A&P emerge from bankruptcy earlier this year.

Supervalu is the country's third largest grocery chain and has several retail banners, including pharmacies and a distribution business. In the last two years it has lost more than $2.5 billion over the past two fiscal years, and its market value has plummeted.

Many analysts continue to believe that Save-A-Lot may be Supervalu's most valuable asset, and the company's distribution business may also be attractive to buyers.