Supervalu Buys Albertsons for $17.4 Billion
Supervalu and CVS face exponential growth with Supervalu’s $17.4 billion purchase of Albertsons.
Wholesaler Supervalu says it will triple its retail operations to 2,656 stores with an estimated $44 billion in revenues by adding the 1,124 stores in Albertsons’ portfolio, including Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s Supermarkets and Star Markets. That makes Supervalu the second-biggest grocer behind Kroger Cos., with 2,510 supermarkets and 792 c-stores and sales of $45.8 billion for the first nine months of fiscal 2005.
Supervalu reported fiscal 2005 sales of $19.5 billion, with 1,577 stores (694 of them company-owned, and 883 licensed or franchised). Of those, 1,277 are Save a Lot discount stores.
The regional strength of Albertsons’ chains will give Supervalu a strong national presence. “By adding prestigious supermarket nameplates across the country, each with strong market presence in their respective regions, we will have the critical mass and footprint to leverage the combined operations to become a more profitable business,” said Supervalu CEO Jeff Noddle said in a statement. “This acquisition is a strategic fit with Supervalu’s approach of operating a diversified portfolio of regional banners— managed and branded— strong prevailing market shares.”
Drug chain CVS picks up 700 stand-alone Osco and Sav-on stores for $2.93 billion, bringing CVS’ reach to 6,100 stores. (CVS also gets Albertsons’ La Habra, CA distribution center.) Supervalu keeps in-store pharmacies across Albertsons’ stores.
The deal is expected to close by summer; Noddle will remain as CEO after the purchase. CVS will buy the drugstores from Supervalu after Supervalu’s acquisition is done. Supervalu’s partners in the purchase include an investment group led by Cerberus Capital Management, L.P., including Kimco Realty, Schottenstein Stores Corp., Lubert-Adler Partners and Klaff Realty.
At the same time, Eden Prairie, MN-based Supervalu is selling 26 Cub Foods stores, mostly in Chicago, to an investment group led by Cerberus, and beefing up its natural-foods retail operations and private-label line. Supervalu plans to open 50 Sunflower Market natural-foods stores by 2011; its prototype opened in Indianapolis earlier this month. The store carries 8,000 to 12,000 natural and organic products, including Supervalu’s W. Newell & Co. specialty produce brand, and its private-label Nature’s Best brand. That 200-item line is also available to Supervalu’s own traditional stores and the 2,200 independent grocers that Supervalu serves as a wholesaler.
