On March 21, Supervalu officially completed the sale of its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores to AB Acquisition LLC, an affiliate of a Cerberus Capital Management-led investor consortium for $3.3 billion. Simultaneously, with the close of the transaction, Robert Miller, president and chief executive officer of Albertsons LLC, also becomes Supervalu’s new non-executive chairman, replacing Wayne Sales, who has been executive chairman since August 2012. Sales will remain on the board as a director along with four other current board members: Donald Chappel, Irwin Cohen, Philip Francis and Matthew Rubel.
The terms include $100 million in cash and the assumption of $3.2 billion in debt. As part of the transaction, Symphony Investors, an investor group led by Cerberus, also took a 21.2 percent stake in Supervalu through a tender offer and the purchase of new shares, making it Supervalu’s largest shareholder.
Supervalu said it transferred operations on March 21 and was “open for business on Friday as a more efficient wholesale and retail company with annual sales of approximately $17 billion.” It will continue to operate and license the Save-A-Lot limited assortment banner and five regional supermarket chains: Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s.
“The successful completion of this transaction marks a significant milestone for Supervalu and our shareholders, customers and employees,” said Sam Duncan, Supervalu’s president and chief executive officer. “As we move forward, Supervalu will continue as one of the largest wholesale grocery providers in America serving nearly 2,000 independent retailers in 43 states; we plan to continue growing our hard discount Save-A-Lot format that includes over 1,300 stores nationwide; and we will operate five, strong regional retail banners.”
AB Acquisition will operate the banners it is acquiring from Supervalu under two separate divisions: New Albertsons Inc. (NAI), which will oversee Acme Markets in the Northeast, Jewel in the Midwest, and the Shaw’s/Star stores in New England, plus all pharmacy operations; and Albertsons LLC which will oversee its existing stores in the South, the Southwest and the Pacific Northwest while absorbing the Albertsons-banner stores in Southern California and the Intermountain West.
Besides Cerberus, based in New York, and Albertsons LLC, based in Boise, ID, the investor group includes: Kimco Realty Corp., New Hyde Park, NY; Klaff Realty LP, Chicago; Lubert-Adler Partners, Philadelphia; and Schottenstein Real Estate Group, Columbus, OH.
As previously agreed upon, five directors voluntarily resigned from Supervalu’s board: Ronald Daly, Susan Engel, Edwin “Skip” Gage, Steven Rogers and Kathi Seifert. Lenard Tessler, senior managing director at Cerberus, also was appointed to the Supervalu board.
Supervalu also said that it has closed on a $1 billion asset based revolving credit facility led by Wells Fargo, US Bank and Rabobank and a $1.5 billion term loan secured by a portion of the company’s real estate, equipment and an equity pledge of Moran Foods LLC (the parent entity of the Save-A-Lot business) led by Goldman Sachs Bank USA, Credit Suisse, Morgan Stanley, Bank of America Merrill Lynch and Barclays. The financings replace a previous credit facility and other debt vehicles.
Shortly after the deal was consummated, Supervalu said it would cut an estimated 1,100 jobs in the wake of its sale of its largest retail chains. The reductions include both current positions and open jobs that will not be filled. The final dates for the affected employees vary.
“The decision to reduce our workforce, although difficult because of the impacts to our people, is the necessary next step in the rebuilding of our business,” said Duncan. “This move is an important part of our strategy to be more focused and efficient in our operations, including how we staff and support our three business units going forward.”
The company added that following the sale of its Albertsons, Jewel, Acme and Shaw’s/Star Market banners, “the remaining organization will require significantly fewer corporate and store support roles and functions, making it important that the company restructure its operations and expenses accordingly.”
The cuts affect almost all of the company’s offices and most departments within the organization. Supervalu said that, “in general,” store-level employees and employees of Save-A-Lot will not be affected. Employees whose positions are eliminated will be offered severance and outplacement services based on Supervalu’s eligibility guideline.
In the Mid-Atlantic region, sources told us that more than 20 people were riffed at Shoppers Food & Pharmacy and about 15 were let go at Farm Fresh. However, we are also told that some of those associates have been reassigned to new positions, primarily in store operations as the new organization is reinstalling department merchandisers in a company-wide effort to become more localized by allowing the divisions to have a greater voice in merchandising, pricing and item mix.
Supervalu also announced appointments to its executive team, including Janel Haugarth, who will remain with the company as executive VP and president of independent business and supply chain services. Haugarth was one of three senior long-term Supervalu executives who will benefit significantly (up to $3.65 million) if she leaves within three years of the completion of the new deal. Instead she will remain with the new Supervalu team for now as Duncan finalizes his leadership team. Haugarth will oversee the company’s wholesale and distribution business which is expected to account for nearly 50 percent of Supervalu’s annual revenues after the transaction closes. Supervalu’s independent business division is the primary grocery supplier to nearly 2,000 of the country’s most successful independent grocery retailers across 43 states. She also will lead supply chain services for the company which consists of 19 distribution centers across the country.
“It was a priority for me to keep Janel with the organization going forward,” said Duncan. “She is highly respected by our independent retailers and her experience and leadership ensures stability as we continue to help these important stakeholders grow and prosper.”
Joining the new Supervalu and reporting to Haugarth will be industry veteran Mike Stigers as the new president of the company’s Northern Region. He succeeds Jim Gilliam, who is leaving to pursue a business opportunity. Stigers, who previously had been president of Shaw’s (now part of AB Acquisitions LLC) will oversee sales and operations at six distribution centers serving more than 750 independent retailers in Central, Northern and Western states. His territory also includes Alaska and Guam. Stigers has 39 years of grocery experience and held a variety of management positions at Safeway, Jons Markets in Los Angeles and PW Supermarkets in San Jose, CA, before his most recent position as president of the Shaw’s banner. Stigers also has worked on the vendor side of the industry, for Bass Inc., a retail automation software company, and for Sterilox Fresh, a food safety company, as regional VP.
“Mike brings tremendous experience to his position as president of the Northern Region,” Haugarth said. “As the company begins a new chapter, I am very confident that Mike will not only help our current independent customers in the region expand and grow, but that he will bring in new customers as well.” Supervalu said Gilliam will remain at the company for the next few weeks to ensure a smooth transition.
In addition, Supervalu also said that Bob Jaskolski has been named vice president of sales, merchandising and marketing for the independent business division, effective immediately. He was formerly executive vice president in the independent business division. He is a 27-year Supervalu veteran. Supervalu said Haugarth plans to add a vice president of corporate logistics to her team in the near future. The balance of her direct leadership team will remain the same, including: Kevin Kemp, president of the Eastern Region; Bill Chew, president of the Midwest Region; and Bernie Grutsch, VP of procurement.
Other new key senior management appointments include Randy Burdick, who has been named executive VP-chief information officer for the company, effective March 25. In this role, Burdick is responsible for Supervalu’s information technology infrastructure and personnel, as well as the shared service/contact center organization. He joins Supervalu after spending the past eight years as chief information officer at OfficeMax.
Burdick has more than 28 years in a variety of technology leadership positions, including experience as group information officer for Hewlett-Packard and chief information officer at Advanced Micro Devices (AMD). He began his career as an automation engineer at Harris Semiconductor. Burdick replaces Kathy Persian, senior VP-chief information officer, who will leave the company. Persian has served in her current role since Sept. 2012 and previously held the positions of group VP-corporate planning, analysis and business process, finance, and group VP-retail and merchandising systems, IT, with the company.
Another veteran Supervalu executive (26 years with the company) in line to receive a large severance ($3.51 million) is CFO Sherry Smith. However, unlike Haugarth, Smith will be leaving SVU next month. The company will name a new chief financial officer at a later date. Additionally, Karla Robertson has been promoted to executive VP for legal, effective immediately. She replaces Todd Sheldon, executive VP, general counsel and corporate secretary, who will stay through May to assist the company in the completion of its fiscal 2013 year-end filings. At that time, Robertson will assume the additional roles and responsibilities held by Sheldon, including the title of executive VP, general counsel and corporate secretary. In this role, Robertson will have responsibility for overseeing the legal, risk management and asset protection teams for the company as well as working closely with Robert Miller, and the company’s 11-person board of directors. Robertson joined Supervalu in July 2009 as senior labor and employment counsel and was later promoted to VP-employment, compensation and benefits law functions.
Michele Murphy has been named executive VP-human resources and corporate communications for the company, effective March 25. In this role, Murphy oversees all of Supervalu’s human resources functions, labor relations and corporate communications. She has spent the last seven years as Supervalu’s senior VP-corporate human resources and labor relations.
Murphy has more than 30 years of experience in a variety of positions dealing with employment law, human resources and labor relations. She has served in roles with international law firm Morgan Lewis, grocery store operator American Stores and roles of increasing responsibility at Albertsons and Supervalu. Murphy replaces Dave Pylipow, executive VP-human resources and corporate communications, who will leave the company at the end of April. Pylipow has served in his current role since 2006, and previously held the position of VP-human resources at Save-A-Lot.
With the transaction completed, J. Andrew Herring, executive VP-real estate, market development and legal, will depart the company. Herring joined Supervalu in February 1998 as VP-corporate development and external relations and was promoted to senior VP in 1999. He has held numerous positions during his career at the company, including management of its in-store pharmacy business from 2002 to 2006. Herring has served in his current role since 2010, during which time he was responsible for real estate, mergers and acquisitions and legal. He is also entitled to receive a severance package that could be worth as much as $2.82 million.
Commenting on the departures, Duncan said, “Andy played a critical role in structuring the deal with AB Acquisition LLC and in overseeing much of the important work necessary to complete the transaction. I appreciate his leadership and many contributions to the company over the past 15 years.”
“I would also like to personally thank Dave and Kathy for their contributions to the company. Dave has been an integral member of Supervalu for 15 years and of the executive team for the last seven. He has worked tirelessly since the transaction announcement to assist me in building our new organization,” said Duncan.
Duncan continued, “During her tenure, Kathy has completed a tremendous amount of work in finance, especially her leadership of our organizational efficiency initiative, and technology, including her leadership of improved tools and processes supporting our retail businesses. I wish Andy, Dave and Kathy all the best with their future endeavors.”
In related Supervalu news, several independent retailers informed us that the company plans to form an advisory council comprised of independent retailers it supplies that will meet approximately quarterly to discuss issues relevant to those retailers and the independent community in general.
And just before presstime, in an SEC filing (SC13G) it was revealed that hedge fund SAC Capital Advisors, led by high-profile investor Steve Cohen increased its stake in Supervalu to 5.1 percent. Cohen now owns 10.79 million shares (he owned only about 25,000 shares at the beginning of the year). At the close of business Supervalu was trading at $4.69 per share.
Also of note is the upcoming release of Supervalu’s fourth quarter and year end 2013 financials on April 24.
