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Supervalu said to solicit bids for whole amid spotty interest

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By Bloomberg News
Saturday, Aug. 25, 2012, 12:01 a.m.

Supervalu Inc.'s financial advisers are asking potential buyers to bid for the entire company, even as several suitors have inquired about individual parts of the grocery business, according to people with knowledge of the matter.

Cerberus Capital Management LP is examining a possible deal involving the Albertsons unit. Koninklijke Ahold NV, the Amsterdam-based parent of Giant Food Stores LLC, is interested in the Shoppers chain, which operates in Maryland, Virginia and Washington, one person said. Supervalu said in July that it hired Goldman Sachs Group Inc. and Greenhill & Co. to find a buyer.

While Eden Prairie, Minn.-based Supervalu's valuation is cheaper than its peers, it may prove difficult to find one purchaser for the company's 11 far-flung regional grocery chains.

In Western Pennsylvania, Supervalu operates Save-A-Lot stores, supplies Shop 'n Save, Foodland and Kuhn's supermarkets and operates a large distribution center in Westmoreland County.

“It's going to be very difficult to sell Supervalu as a whole,” said Charles Cerankosky, a Cleveland-based analyst at Northcoast Research Holdings LLC. “The most likely scenario, as opposed to what the board or management would like to do, is the company ends up being broken into pieces.”

Mike Siemienas, a spokesman for Supervalu, declined to comment on the sale process. Peter Duda, a spokesman for Cerberus, declined to comment. Jochem van de Laarschot, a spokesman for Ahold, said the company does not comment on rumors. Michael Duvally, a spokesman for Goldman Sachs, also declined to comment.

One possible outcome is that a private equity buyer will acquire the entire company, keep some of the chains and sell other pieces. Such bids would take longer to put together because the company would have to find interested parties for pieces of the retailer before approaching the company about a bid while respecting Supervalu's confidentiality requirements.

“Jewel in Chicago is very different than Save-A-Lot, which is very different than Albertsons in southern California,” one person said. “What all of the operating units have together is poor performance, which makes it difficult to go to a single buyer and say: ‘This is a growth story' or ‘This is easy to fix.' ”

The stock, which tumbled 74 percent this year, closed up 10.9 percent at $2.35, adding 23 cents on Friday, after news of action to sell the company.

Supervalu has more than 2,400 retail food stores, including 935 licensed Save-A-Lot locations, and its wholesale business has about 2,660 customers.

“The No. 1 problem is, everything in Supervalu costs too much” and is more expensive than Kroger and the discounters, said David Dietze, president and chief investment strategist at Summit, N.J.-based Point View Wealth Management, whose clients own Supervalu shares. “Customers are saying, ‘I can't afford to pay those prices, I'm going to drive out of town and stock up the minivan to save.' ”

Revenue at Supervalu is projected to drop 4.4 percent to $34.5 billion in the year ending in February, marking the fourth straight year of sales declines, according to data compiled by Bloomberg.

Save-A-Lot, which prices its food 40 percent less than traditional grocers, may be the most valuable of Supervalu's assets and may fetch as much as $1.94 billion, Deborah Weinswig, an analyst at Citigroup Inc., said in an Aug. 17 note. The grocer's distribution business may get about $817 million from a buyer, she said.

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