Rumor has it that leading grocery chain
) has finally found a potential buyer in private equity firm
Cerberus Capital Management LP.
The Wall Street Journal
, Cerberus has agreed to buy parts of the assets of the grocery
chain for $500 million in equity as well as a major stake in the
Supervalu is also planning to sell its discount food stores
Save-A-Lot separately as it has been reporting declining sales
for several consecutive years.
Moreover, Cerberus is reported to have been willing to buy the
whole of the company for $900 million. However, some of the
financing banks objected to the valuation.
Supervalu had been looking for broad-based strategic
alternatives that included the sale or disposition of all or a
part of the company in order to increase shareholder's value.
People close to the company said that with the Cerberus deal
nearing its final stage, the company had finally gone ahead with
its strategic alternatives.
Supervalu broke even on a per share basis in the second
quarter of fiscal 2013, lagging the Zacks Consensus Estimate of
12 cents and the year-ago quarter's earnings of 28 cents a share.
The weak results were due to disappointing sales in all the
segments during the quarter.
Moreover, the company reported negative identical store sales
successively for the past four years. The trend has continued in
the first half of fiscal 2013 as well.
Now, in order to combat four successive years of negative
identical store sales and re-position the company for growth,
Supervalu is gearing up to expand its private brand portfolio and
step up cost-reduction initiatives that are expected to reduce
administrative and operational expense by an additional $250
million by fiscal 2014.
This is in addition to the company's current target of
curtailing $75.0 million in expenses for fiscal 2013. As a part
of this strategy, in September 2012 Supervalu closed down 60
underperforming stores, including 27 Albertsons and 22
Save-A-Lots. The closures are expected to generate $80
million-$90 million in savings over 3 years.
Supervalu, which competes with
The Kroger Company
), currently holds a Zacks #4 Rank (short-term Sell rating).
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SUPERVALU INC (SVU): Free Stock Analysis
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