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Jewel-Osco sold to investor group

Supervalu Inc. says it reached a deal to sell five of its biggest grocery chains – Albertson’s, Acme, Jewel-Osco, Shaw’s and Star Market – for $100 million in cash and more than $3 billion in debt.

The sale to AB Acquisition, an investor group led by Cerberus Capital Management, will include 877 stores. Cerberus also will offer to buy up to 30 percent of the remaining Supervalu for $4 per share after the deal closes.

The investor group will acquire the stores for $100 million in cash, and the new company will assume $3.2 billion in existing debt.

There are seven Jewel-Osco stores in McHenry County, employing about 1,400.

Supervalu stock jumped 14 percent to close at $3.47 after Thursday’s announcement.

Supervalu has struggled for years to turn around its business. The broader supermarket industry has been facing growing competition from big-box retailers such as Target, drug store chains and even dollar stores. While other chains such as Kroger Co. and Mariano’s have adapted by tweaking store formats and building customer loyalty through discount programs and improved offerings, Supervalu has scrambled to keep pace.

This summer, Supervalu fired its CEO and tapped Chairman Wayne Sales to lead a turnaround. The company said at the time that it was reviewing its options, such as putting itself up for sale.

Following the closing of the deal, Supervalu will consist of a food wholesaler, Save-A-Lot, and regional chains Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s. The company, based in Eden Prairie, Minn., is expected to generate annual revenue of more than $17 billion, down from $35 billion. Supervalu said it will continue to work on cutting costs and fixing its business. Supervalu has approximately 125,000 employees.

Supervalu said grocery retail veteran Sam Duncan will replace Sales after the deal closes.

“The transactions announced today represent the successful culmination of the in-depth strategic review process we commenced this past summer,” Sales said. “Following the sale, Supervalu will have three strong, market-leading business units with more consistent cash flows.”

Earlier this week, Supervalu announced plans to lay off 117 employees, starting in March, as a result of its Pleasant Prairie, Wis., distribution center closing.

Supervalu had previously disclosed plans to close its food distribution center, located in LakeView Corporate Park in Pleasant Prairie.

The company said in October it was selling the underused facility to Grand Rapids, Mich.-based Meijer Inc., which is adding new combined supermarket-discount stores in southeastern Wisconsin. Supervalu said it would instead serve customers from its Green Bay distribution center.

The company also said it would relocate its regional offices now based at the distribution center, 7400 95th St. Supervalu has about 225 employees in those offices.

The distribution center will close by May 1, and Supervalu said it plans a series of layoffs with the first occurring by March 9.

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