Posted by Terrie // The Shelby Report
Supervalu President and CEO Mark Gross said on a conference call Tuesday morning announcing the deal that the sale of Save-A-Lot late last year gave Supervalu the opportunity to pursue a business like Unified. He also noted that Supervalu intends to expand its wholesale operations, possibly through acquisition.
Supervalu will pay approximately $114 million in cash for 100 percent of the outstanding stock of Unified Grocers plus the assumption and payoff of Unified Grocers’ net debt at closing (approximately $261 million as of April 1).
The two grocery wholesale organizations had combined sales of approximately $16 billion in 2016. Together, Supervalu and Unified operate 24 distribution centers supplying customers in 46 states and serve a combined customer base of more than 3,000 stores.
The combined company will be able to serve a broad range of independent customers and offer an array of value-added services.
The acquisition also provides the potential expansion of Unified’s Market Centre division, a specialty and ethnic products business, to more independent grocers.
“We’re thrilled at the opportunity to bring together these two great organizations,” Gross said in a prepared statement. “By acquiring the Unified business, including gaining a wealth of expertise and talent, we will become a stronger and more efficient organization. The transaction will enhance our ability to help our customers better compete in the evolving grocery industry. We’re also excited to serve Unified’s dynamic retailer base. Unified’s members and customers operate some of the country’s most exciting and progressive Hispanic and multiple other ethnic formats, specialty, gourmet, natural/organic, price impact and traditional stores. They complement our existing customer base and we look forward to facilitating collaboration and innovation across such an impressive collection of creative merchants.
“We appreciate the experience, intelligence and dedication of the Unified team, and look forward to welcoming Unified associates to Supervalu and supporting them as we continue the important work of contributing to the growth and success of our customer network and helping to deliver value to our stockholders,” Gross added. “We will make a great team together.”
“We believe this transaction will benefit the members and customers of Unified Grocers as they look for new and innovative ways to serve the communities in which they operate,” said Unified Grocers’ President and CEO Bob Ling. “Supervalu and Unified share a common vision of providing best-in-class services and products to the independent grocer. The cultural fit between Supervalu and Unified well positions the combined company to pursue a shared dedication and commitment to growth and innovation, providing increased value to customers.”
Transaction expected to close this summer
The transaction, which was unanimously approved by each company’s board of directors, is currently expected to close in mid- to late summer, subject to approval by Unified’s shareholders and other customary closing conditions. Following completion of the merger, Unified Grocers will be a wholly-owned subsidiary of Supervalu.
Following the completion of the transaction, Supervalu, with its headquarters in Eden Prairie, Minnesota, will maintain a visible presence in Commerce, California, where Unified’s headquarters are located, as well as throughout the West Coast, including management and employees of the combined company.
Supervalu expects to incur transition and integration costs of up to $60 million within the first two years following the completion of the transaction. By the end of the third year following the completion of the transaction, the combined business will achieve a run rate of at least $60 million in cost synergies derived in part from consolidation of some back office functions.
The transaction is expected to be accretive to earnings per share, excluding the transition and integration costs, as well as potential purchase accounting adjustments, in the first full fiscal year following closing that begins Feb. 25, 2018.