Supervalu Inc. is selling off five of its grocery chains, including Albertson’s and Jewel-Osco, after years of being squeezed by intensifying competition.
The nation’s No. 3 traditional supermarket operator said Thursday that the sale of 877 stores to an investor group led by Cerberus Capital Management also will include Acme, Shaw’s and Star Market. The group already owns about 200 Albertson’s in the South and Southwest.
Following the sale, Supervalu will focus on its Save-A-Lot discount stores, as well as its smaller regional chains Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s. It also will keep its wholesale business that distributes groceries to stores.
There are four Jewel-Osco stores in the Quad-City area: Moline, East Moline, Silvis and Clinton. There also are Save-A-Lot stores in the Quad-Cities.
The investor group will pay $100 million in cash for the stores, and the new company will assume $3.2 billion in existing debt. Cerberus also will offer to buy up to 30 percent of the remaining Supervalu for $4 per share after the deal closes.
Supervalu has struggled for years to turn around its business. The broader supermarket industry has been facing growing competition from big-box retailers such as Target, drugstore chains and dollar stores. While bigger chains such as Kroger Co. have adapted by tweaking store formats and improving discount programs and product offerings, Supervalu has scrambled to keep pace.
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This summer, Supervalu fired its CEO and tapped chairman Wayne Sales to lead a turnaround. The company said at the time that it was reviewing its options, such as putting itself up for sale. In the meantime, it has closed stores and cut jobs as part of an effort to reduce costs. Those efforts to fix its business will continue after the sale of its grocery chains is complete, the company said. Sam Duncan, who most recently was CEO of OfficeMax, will replace Sales as head of Supervalu after the deal closes.
On Thursday, Supervalu also reported a profit of $16 million, or 8 cents per share, for the third quarter. The results were boosted by a gain related to a settlement with credit card companies. A year ago, the company lost $750 million, or $3.54 per share.