Deal to Breathe Life into Supervalu - Research Report on Supervalu Inc.

Shares of struggling retailing giant Supervalu surged after news of the planned sale of five of its chains to an investor group surfaced as of late, to alleviate its financial woes

Jan 24, 2013, 08:30 ET from National Traders Association

NEW YORK, January 24, 2013 /PRNewswire/ --

Grocery retailer and distributor Supervalu Inc.'s (SVU) [Full Research Report](1) stock rose by more than 14 percent recently in the midst of its talks to sell five of its supermarket chains to an investor consortium led by private equity firm Cerberus Capital Management.

Supervalu will be selling Albertson's, Acme, Jewel-Osco, Shaw's, and Star Market for $100 million in cash and $3.2 billion in existing debt. The group will also buy up to 30 percent of the remaining company for $4 per share. This sale would add 877 stores to the consortium's previously purchased 200 Albertson's stores in the South and Southwest.

This sale would more than halve the company's debt burden from nearly $6.2 billion to just $3 billion, while cash balance would grow to $255 million. Standard and Poor's Rating Services also indicated that they may also upgrade Supervalu's credit rating from the current "B", or "junk" status (five notches below investment grade) as they believe the sale would improve profitability aside from reducing debt.

The retail chain has been losing ground to discount and non-traditional competitors like Wal-Mart, Target, and Costco after its $17 billion acquisition of Albertson's in 2006. Cerberus also participated in the purchase of the more than 1,100 stores, as well as CVS Caremark.

It was thought this deal would give "exponential growth" to Supervalu, especially for real estate investments. However, the company was burdened with huge debt and fell victim to the financial crisis two years later, unable to recover its position against fiercer than usual competition.

Originally, Supervalu wanted to sell the entire corporation, only to be hindered by financing issues later on. After the sale, the company's business will largely consist of the independent business segment, and will run a chain of 1300 Save-A-Lot stores and some of the leading regional retail food banners such as Cub, Shoppers, Farm Fresh, Hornbacher's.

After the deal pushes through, the annual revenue is expected to reach in excess of $17 billion compared to the previous year. Supervalu is currently trading at a little over $3 per share with a market value of $750 million, down by almost 65 percent over the last 12 months.

Reference Links:

(1)   The Full Research Report on Supervalu Inc. - including full detailed breakdown, analyst ratings and price targets - is available to download free of charge at: []

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