Many people in Florida are familiar with the grocery retail and supply chain giant Supervalu. Currently sitting as the No. 3 U.S. grocery store operator, few knew that the company was actually struggling to stay afloat amongst almost $3.2 billion in debt.
By the end of the latest quarter, an analyst of Supervalu estimated that the company owned more than $6.18 billion in long-term debt and capital lease obligations after being hit hard by the U.S. recession. In an attempt to make a turnaround though, the company announced this month that it has struck a $3.3 billion deal with an investor group led by Cerberus Capital Management LP. A sale the company hopes will allow the company to start from square one again.
Cerberus Capital Management's acquisition of Supervalu will be a complex transaction that is not expected to close until the end of March. After the deal is complete, Cerberus will own 877 stores from the Albertsons, Acme, Jewel-Osco, Shaw's and Star Market chains as well as in-store pharmacies under the Osco and Sav-on names.
In total, Cerberus is expected to spend $100 million in cash and take on $3.2 billion in Supervalu's debt, though some financial experts say the deal is more of a real estate play. "You don't buy failing grocery stores because you want to be in the grocery business," says a supermarket consultant. In his opinion, the group is likely to sell and close many of the stores it's buying to make back a majority of its investment.
Source: Reuters News, "UPDATE 4-Supervalue selling 877 supermarkets in $3.3 billion deal," Jan. 10, 2013
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