| NEW YORK
NEW YORK Oct 24 A sale of Supervalu Inc
heralds an eventual break-up of the far-flung supermarket
operator, with its diverse brands and assets sold to rival
supermarket chain operators and private equity firms, according
to people familiar with the matter.
Buyout firm Cerberus Capital Management is preparing a
takeover bid for the third-largest U.S. supermarket chain, with
an eye toward divesting the troubled company's assets to several
parties only interested in pieces, the people said.
The board of Supervalu is also weighing a piecemeal sale,
after its earlier efforts to sell the company as a whole failed
to generate enough buyer interest, the people said.
A few months into the auction, only Cerberus is believed to
be pursuing Supervalu as a single entity, some of the people
said. Most interested parties, including Dutch retailer Ahold
, C&S Wholesale Grocers, KKR & Co LP and other
buyout firms, are looking at select assets only, the people
Supervalu will evaluate if a piecemeal sale could fetch a
higher price than selling it outright to one buyer, the people
said. A goal to maximize value, however, will be measured
against the merits of pursuing one single transaction, which
would be far more simple and less risky, the people said.
A sale to Cerberus would mean the buyout firm would be given
the job of turning around the struggling company and doing a
breakup itself, they said.
The people asked not to be named because details of the
process are not public. A Supervalu spokesperson said the
company is in talks with several parties, but declined to give
any further details. Cerberus could not be reached for comment.
CERBERUS'S ALBERTSONS PLAYBOOK
Cerberus, the New York-based buyout firm with turnaround
expertise, is in talks to line up several billion dollars in
debt financing from banks including JPMorgan Chase & Co
and Bank of America, according to the people familiar
with the matter. A buyout of Supervalu could also require an
equity check of more than $900 million, the people said.
Cerberus' Supervalu strategy is widely expected to mirror
its playbook at Albertsons, the supermarket chain that was sold
to the private equity investor, Supervalu and CVS Caremark Corp
for $10 billion in 2006.
Cerberus acquired 655 Albertsons locations and a few
locations of other various brands in the complicated carve-out,
under which Supervalu bought the remaining 564 stores in the
Albertsons chain. Cerberus sold most of its assets, but held on
Similarly, any Supervalu buyout by the investor would be
followed by a series of divestitures, people familiar with the
With its existing Albertsons footprint, Cerberus is expected
to retain the chain while looking to divest other businesses
such as Jewel-Osco, Save-A-Lot and Shoppers, which have
attracted interest from other buyers, the people said.
Netherlands' Ahold is interested in the Shoppers chain,
several people familiar with the matter said, while C&S
Wholesale is interested in Supervalu's distribution business,
the people said.
Buyout shops KKR, TPG Capital and Ron Burkle's Yucaipa are
also looking at Supervalu's other businesses, they added.
Save-A-Lot has been the company's best-performing business,
while Albertsons has been its Achilles' heel.
Ahold and KKR declined to comment. C&S, TPG and Yucaipa
could not be reached for comment.
Supervalu is weighing a sale after losing customers to
competing supermarket operators like Wal-Mart Stores Inc
and Kroger, which has forced Supervalu to aggressively
close stores and cut costs.
The Eden Prarie, Minnesota-based company said in July it was
working with advisers Goldman Sachs Group and Greenhill &
Co for a strategic review. It disclosed in its earnings
call last week that it is in talks with several suitors.
The company has struggled with a large debt burden as well
as pension liabilities which could make a sales process
difficult, analysts have said. Supervalu has $6 billion in long
term debt obligations, according to its latest quarterly