As the process to sell Supervalu continues to unfold, multiple sources have pointed to Cerberus Capital Management, LP as being the front runner to acquire all of Supervalu’s assets.
When the Eden Prairie, MN retailer/wholesaler first announced in July that it had hired Goldman Sachs and Greenhill & Co. to perform an asset review of the troubled firm, many industry observers wondered if Supervalu was saleable in one piece.
And in an October 2 story, Bloomberg reported that not only was Cerberus interested but so were other private equity firms Yucaipa, KKR and TPG Capital. However, the story added that those three investment firms were looking to acquire only pieces of Supervalu, not the entire corporate entity.
Several sources noted that they believe that Cerberus will be the only player willing to step up to the plate and acquire all of Supervalu’s assets, although one source believed that a deal could be announced with Cerberus as the lead player with additional organizations interested in specific pieces of SVU’s operation.
“First off, there has been a solid relationship between Supervalu and Cerberus (in 2006 Cerberus acquired 655 stores as part of the sale of Albertsons) and they continue to license the Albertsons name from Supervalu,” saidone Wall Streetanalyst. “I think Cerberus would have a keen interest in Supervalu’s Southern California and Intermountain (Washington, Oregon, Idaho) operations. Additionally, by selling the entire company (rather than in pieces), Supervalu could potentially escape future debt (currently at $6 billion) and pension fund obligations.”
If Cerberus did acquire all of Supervalu, another Wall Street analyst suggested that it could follow its Albertsons LLC strategy of selling stores in markets that were not a fit for the retailer (i.e. Northern California, where it sold 132 stores to Save Mart) or closing or selling stores in existing markets where it faces tough competition (i.e. Florida, where it has sold many of its stores to Publix and now only operates four units). Of those original 655 stores, there are now only 190 stores remaining, which trade as Albertsons Market.
“At the end of the day, the real estate value of its assets will be of major concern to any financial buyer,” that analyst noted. “A total entity deal would not only be preferable for Supervalu, it could be beneficial to a financial buyer for the value of the real estate (more than 1,100 supermarkets alone). I would guess that if Cerberus gets the whole Supervalu enchilada there will be other minority partners included, too.”
Asked who those might be, he responded, “You can never count out Yucaipa. Burkle likes these kinds of deals and he is the best candidate to acquire Acme and Shaw’s, both from a real estate potential and his ability to possibly lessen the burden of existing onerous labor contracts, as he did with the A&P deal. Beyond that, one could make an argument that strategic retailers like AholdUSA, Kroger or Harris Teeter would be interested in a smaller entity like Farm Fresh, or Kroger could work a deal with Cerberus to acquire Jewel, which might be backsliding, but has many great locations and is still very profitable. Or Cerberus could opt to keep some of their better performing properties like Save-A-Lot and look to flip them in a few years. There is an advantage to both sides for a ‘one entity’ deal,” the analyst stated.
We have also learned that Sam Duncan, former president of Fred Meyer, is involved with the diligence process for Cerberus and could emerge as CEO of the new entity if the private equity firm does gain control of Supervalu. Interestingly,Duncanhas previously worked with Bob Miller (current CEO of Albertsons LLC) at Albertsons and Fred Meyer and has also worked with Sam Martin, who now serves as president and chief executive of Yucaipa-owned A&P. Duncan began his career with Albertsons.
We have also learned that the original October 15 deadline to receive all bids (a prospectus detailing all properties was issued by Supervalu in late August) will be extended, although our sources all agreed that a potential Cerberus-led deal could be completed by November 15.
Clearly, this story remains very fluid and could see an outcome occur more quickly than many expected.