MINNEAPOLIS -- Supervalu Inc. has entered into a definitive agreement with private-equity firm Onex Corp. for Onex to acquire Supervalu’s Save-A-Lot hard-discount, limited-assortment grocery-store business for $1.365 billion in cash, subject to customary closing adjustments.
Earth City, Mo.-based Save-A-Lot owns and operates 472 corporate stores, and services and supplies another 896 licensee-owned stores across the country. The stores provide a limited selection of national and store-brand products with a focus on its fresh offerings, including meat and produce.
Smaller than most grocery stores but larger than traditional convenience stores, Save-A-Lot stores measure between 12,000 and 20,000 square feet and offer approximately 3,000 SKUs. The chain courts convenience-store operators who may find the size attractive to diversify their businesses.
“Today’s announcement is the result of a thorough process to maximize the value of the Save-A-Lot business and best position Supervalu for future success,” said Jerry Storch, Supervalu non-executive chairman. “Supervalu is successfully executing on its long-term strategic vision and positioning the company for continued growth and value creation. We are confident that this transaction will create exciting opportunities for both Supervalu and Save-A-Lot.”
Mark Gross, Supervalu president and CEO, said, “The sale of Save-A-Lot is another important step in Supervalu’s transformation. It provides us with a stronger balance sheet that will allow us to further build on our core strengths and growth opportunities.”
In connection with the sale, Supervalu and Save-A-Lot will enter into a five-year professional services agreement. Supervalu will provide Save-A-Lot with certain services and support functions for its day-to-day operations, including cloud services, merchandising technology, payroll, finance and other technology and hosting services.
The companies expect to complete the sale of Save-A-Lot by Jan. 31, 2017, subject to regulatory approvals and other customary closing conditions.
Supervalu expects to use the net proceeds from the sale to prepay at least $750 million against its outstanding term loan balance and to further reduce debt and improve its capital structure, as well as to fund corporate and growth initiatives.
Minneapolis-based Supervalu is one of the largest grocery wholesalers and retailers in the United States with annual sales of approximately $18 billion. It operates a network of 3,342 stores, 1,773 operated by wholesale customers serviced primarily by the company’s food distribution business; 1,368 Save-A-Lot stores; and 201 traditional retail grocery stores.
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