Cerberus-led consortium buys five grocery chains for $3.3bn

The consortium is purchasing grocery chains Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market from US retail giant Supervalu, as well as the underlying real estate. In addition, a Cerberus-led investment entity will purchase up to 30 percent of Supervalu’s outstanding shares.

A consortium of investment firms led by New York-based Cerberus Capital Management is looking to buy five grocery chains comprising 877 retail stores from the Minneapolis-based retail giant Supervalu for $3.3 billion.

According to statements from both parties, the consortium has entered into a definitive agreement with Supervalu to buy its Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market stores, as well as its related Osco and Sav-on in-store pharmacies and the all the underlying real estate of those chains. The consortium also includes Lubert-Adler Partners, the Philadelphia-based private equity real estate firm; Kimco Realty, the New Hyde Park, New York-based REIT; Klaff Realty, a Chicago-based private real estate investment firm focused on mixed-use office and retail assets; and Schottenstein Real Estate Group, a Columbus, Ohio-based residential and commercial developer.

As part of the deal, which is being financed with $100 million in cash and $3.2 billion in debt, the five grocery chains will be acquired by AB Acquisition, an affiliate of Cerberus. Following the sale, which is expected to close in the spring, a newly formed entity called Symphony Investors, led by Cerberus, will purchase up to 30 percent of Supervalu's outstanding shares for $4 each, representing a 50 percent premium over the stock's 30-day average. If Symphony cannot acquire at least 19.9 percent of the outstanding shares at that price, Supervalu must issue additional stock.

Supervalu has a network of approximately 4,350 retail outlets, including 1,068 traditional retail stores. Following the sale, Supervalu will consist of the Independent Business, a food wholesaler that serves 1,950 stores across the country; Save-A-Lot, a discount grocery chain with approximately 1,300 stores in the US; and regional food chains Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's.