* Cerberus to buy some Supervalu assets - source
* Banks objected to bigger deal - sources
* Supervalu shares end trading up 13.5 pct
By Greg Roumeliotis and Olivia Oran
NEW YORK, Jan 4 Private equity firm Cerberus Capital Management LP is nearing an agreement to buy parts of Supervalu Inc and an announcement could come as early as next week, a person familiar with the matter said on Friday.
The Minneapolis, Minnesota-based grocer has been closing stores and cutting costs to reverse losses and cut debt. It suspended its dividend in July to fund aggressive price cuts and it also put itself up for sale.
Cerberus and its partners plan to buy some Supervalu assets and take a stake in the remaining public company after banks balked at financing a deal for all of the third-largest U.S. supermarket operator on the proposed terms, the person said. The person spoke on condition of anonymity because negotiations are confidential.
A Supervalu spokesman said on Friday the company's review of strategic alternatives was proceeding and that it was in "active discussions with several parties." He declined to comment further.
Supervalu owns store chains that include Jewel-Osco, Save-A-Lot and Albertsons.
Cerberus, a New-York-based private equity firm that specializes in turning around companies and has over $20 billion of assets under management, declined to comment.
Supervalu shares closed up 13.5 percent on Friday, giving the company a market value of about $630 million. The Wall Street Journal earlier published a report on its website on the status of the deal.
A deal for all of Supervalu would have required that Cerberus contribute about $900 million as equity, according to another person familiar with the talks. After some banks objected, the deal was downsized and the equity became about $500 million, the source added.
Save-A-Lot, one of Supervalu's better performing businesses that competes with Kroger Co's discount Food-4-Less chain, is likely to be sold separately, the second person and another person familiar with the matter said this week.
Cerberus' Supervalu strategy is widely expected to mirror its play-book at Albertsons, the supermarket chain sold to the private equity investor, Supervalu and CVS Caremark Corp for $10 billion in 2006.
Cerberus acquired 655 Albertsons locations and a few belonging to various other brands in the complicated carve-out, under which Supervalu bought the remaining 564 Albertsons stores. Cerberus sold most of its assets, but held on to Albertsons.
In October, Supervalu posted a net loss of $111 million, or 52 cents per share, for the second quarter ending on Sept. 8 compared with a year-earlier profit of $60 million, or 28 cents a share.