(Jan. 23) Supervalu Inc. will become the nation’s second-largest supermarket retailer after reaching an agreement, along with two other companies, to buy Albertson’s Inc., Boise, Idaho, for $9.7 billion in cash and stock and $7.7 billion in debt assumption.
Supervalu, Eden Prairie, Minn.; CVS Corp., Woonsocket, R.I.; and an investment group led by Cerberus Capital Management LP, New York, announced the deal Jan. 23. Albertson’s stockholders are to receive $26.29 per share in cash and Supervalu stock.
Albertson’s had been on the block since September. On Dec. 23, Albertson’s said it was no longer considering selling the entire company after negotiations stalled. That deal, which would have been worth $26 a share, broke down because of antitrust issues, according to The Wall Street Journal.
The new deal, which is expected to close in the summer, was expected to boost Supervalu’s annual sales from $20 billion to $44 billion and give the chain 2,656 stores in 48 states.
Chairman and chief executive officer Jeff Noddle said the sale gave Supervalu high market shares in areas where the company previously had little or no presence, such as Boston, Philadelphia, Las Vegas and San Diego. For example, Supervalu acquired 134 Acme Markets, which is the No. 1 chain in Philadelphia.
Supervalu has committed $12.4 billion to the Albertson’s purchase — $3.8 billion in cash, $2.5 billion in stock and $6.1 billion in debt assumption, Noddle said.
“One of the most attractive things to us through this whole thought process has been the leading markets where Albertson’s has had an excellent share of the markets,” he said during a teleconference. “Most of those markets are new to us, and in almost every one of them, they have a No. 1 or No. 2 share.”
Supervalu will acquire 1,124 stores under the Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s, Star Markets and Albertsons banners in Chicago, New England, the Northwest and Southern California. Supervalu also will acquire in-store pharmacies under the Osco and Sav-On brands, while CVS will acquire about 700 stand-alone Sav-On and Osco drugstores in Southern California, the southwest and Midwest. The Cerberus group will acquire 655 Albertsons and Super Saver stores in Texas, Northern California, Florida, the Rocky Mountains and the Southwest.
Noddle said Supervalu was purchasing the top-performing stores in Albertson’s chain.
“We only bought certain markets in certain parts of the country,” he said. “What we bought of Albertson’s has been very successful. The opportunity to go into a great company like Albertson’s and be able to select the markets that fit your geography, your style of operations and your brands is a compelling opportunity.”
Jewel-Osco has about 200 stores in the Chicago area and ranks No. 1, with more than 40% of the market, Noddle said. Supervalu announced Jan. 23 that it has sold 26 Cub Foods stores in the Chicago area to Cerberus. The price of that transaction was not disclosed.
The sale is subject to approval of the stockholders of both Supervalu and Albertson’s.
“We think this is a very good price and a very fair price for the assets we are acquiring,” he said.
Noddle said there were no immediate plans to change the names of any of the stores. He also stressed that local stores would continue to control what products they promote and display but said the expanded Supervalu would help improve operational efficiency with an expanded distribution network and greater purchasing power.