Cerberus bags five Supervalu chains in $3.3B deal - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
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Cerberus bags five Supervalu chains in $3.3B deal

by Lou Whiteman  |  Published January 10, 2013 at 4:00 PM
Grocery store operator Supervalu Inc. said Thursday it would sell five retail chains to an investor group led by Cerberus Capital Management LP in a deal valued at $3.3 billion in cash and assumed debt.

Minneapolis-based Supervalu, which ranks as the third-largest grocery operator in the U.S., said it would sell the Albertsons, Acme, Jewel-Osco, Shaw's and Star Market chains along with its related Osco and Sav-on pharmacy operations to the group, which in addition to Cerberus includes Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners LP and Schottenstein Real Estate Group.

Terms of the deal call for the consortium to pay $100 million in cash and assume $3.2 billion in debt.

An investor group led by New York-based Cerberus called Symphony Investors has also agreed to acquire up to a 30% stake in Supervalu for $250 million, with Symphony set to conduct a tender to buy the shares for $4 apiece on the open market. Should Symphony not obtain at least 19.9% of Supervalu's shares via the tender, the chain will be obligated to issue new shares of its stock to allow the group to reach that total.

Post-deal, Sam Duncan, the one-time chairman and CEO of OfficeMax Inc., will replace Wayne Sales as CEO of Supervalu. Following the sale Supervalu will be a $17 billion operation with assets including a food wholesaler, the Save-A-Lot discount grocery chain and a collection of regional chains.

Sales in a statement called the agreements "the successful culmination of the in-depth strategic review process we commenced this past summer," saying that post-deal Supervalu "will have three strong, market-leading business units with more consistent cash flows and improved Ebitda growth potential."

In connection with the deals, Supervalu said it has negotiated a new and fully underwritten $900 million asset-based revolving credit facility led by Wells Fargo & Co. and a $1.5 billion term loan led by Goldman Sachs Bank USA, Credit Suisse Group, Morgan Stanley, Bank of America Merrill Lynch and Barclays plc that is secured by a portion of the company's real estate as well as an equity pledge of the Save-A-Lot business.

The proceeds of these financings will be used to replace Supervalu's existing $1.65 billion asset-based revolving credit facility and an existing $846 million term loan, and to call and refinance $490 million in bonds scheduled to mature in November 2014.

The deals are subject to conditions including the fully underwritten refinancing of the Supervalu debt, and are expected to close in the current quarter. The deals are not subject to Supervalu shareholder approval.

Goldman, Sachs & Co. and Greenhill & Co. LLC acted as financial advisers to Supervalu, with Wachtell, Lipton, Rosen & Katz providing legal advice.

Cerberus was advised by Lazard's Terry Savage, Pranav Popat, Jeffrey Cohen, Jason Wooten, Carole Flaton and Ron Bloom along with Barclays, with Barclays also serving as dealer manager for the tender offer.

A Schulte Roth & Zabel LLP team including Stuart Freedman, Robert Loper, John Pollack, Alan Waldenberg, Kurt Rosell, Michael Littenberg, Ronald Risdon, Ronald Richman, Laurence Moss, Robert Kiesel, Howard Epstein, Michael Swartz, Peter Halasz, Jeffrey Lenobel, Marshall Brozost and Julian Wise served as Cerberus' legal counsel.

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Tags: Acme | Albertsons | Bank of America Merrill Lynch | Barclays plc | Cerberus Capital Management LP | Credit Suisse Group | Goldman Sachs & Co. | Goldman Sachs Bank USA | Greenhill & Co. LLC | Jewel-Osco | Kimco Realty Corp. | Klaff Realty LP | Lazard | Lubert-Adler Partners LP | Morgan Stanley | Sam Duncan | Save-A-Lot | Schottenstein Real Estate Group | Schulte Roth & Zabel LLP | Shaw's | Star Market | Supervalu Inc. | Wachtell Lipton Rosen & Katz | Wells Fargo & Co.

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Lou Whiteman

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