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United Natural Foods Acquires Supervalu For Nearly $3 Billion

United Natural Foods Acquires Supervalu For Nearly $3 Billion

Grocery giant Supervalu has finally found a buyer. United Natural Foods (UNFI) has acquired Supervalu for approximately $2.9 billion, including debt. Executives at Supervalu and UNFI said the combined firm will sell the retail business, including the 78-store Cub Foods grocery chain, that accounted for about one-third of Supervalu's $14 billion annual revenue. 

Under CEO Mark Gross, who has led Supervalu since 2016, the grocer pivoted more towards a wholesaler role, purchasing other wholesalers including Unified Grocers and Associated Grocers in 2017.Supervalu’s other retail operations include the regional chains Shoppers, Shop ’n Save, Farm Fresh Food & Pharmacy and Hornbacher’s.

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In 2006 the company bought the bulk of Albertsons Inc., then the nation's No. 2 grocer with more than 1,100 stores, for $17 billion. Supervalu ran the retailer until 2012 when, amid declining sales and market share, it sold most of those operations to an investment firm for just over $3 billion. Ever since then, Supervalu has pursued sales divestments on its retail side, selling off its Save-A-Lot discount grocery chain for $1.36 billion in late 2016, and then selling 21 of its 38 Farm Fresh stores for $43 million in March 2018. 

While United Natural Foods specializes in private label fruits, vegetables, bakery and vitamins, Supervalu produces private label items in dairy, frozen foods, deli and butchery products, giving the combined company a larger presence across food sales.

“The acquisition gives more credence to our assessment that the wholesale food distribution business needs scale now more than ever to counter the pricing and competitive pressure permeating throughout the food retailing business,” said Mickey Chadha, VP and Senior Credit Officer at Moody’s in a statement. “With extremely thin margins at Supervalu and organic growth opportunities hard to come by…it makes sense to join forces with UNFI which has more than 35% of its sales to grocery stores that specialize in faster growing natural and organic foods, including Whole Foods.”

United Natural Foods CEO and Chairman Steven Spinner will lead the combined company. Sean Griffin, United Natural Foods chief operating officer, will lead Supervalu during the integration phase.

The acquisition comes after activist investor Blackwells Capital LLC, a firm with 8% ownership in Supervalu, encouraged the company to explore a sale. The firm nominated six candidates for the company’s nine-seat Board of Directors in an effort to deliver a turnaround for shareholders, but Supervalu advocated for the reelection of its incumbent directors ahead of its voting process.

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