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UNFI to acquire Supervalu, expanding product selection and customers

United Natural Foods Inc. pays $2.9 billion, plans to sell off retail business

United Natural Foods Inc., a leading distributer of natural foods, will acquire Supervalu, a competing distributor that also owns and operates retail stores, by the end of the calendar year, the two companies announced Thursday.

UNFI is paying $32.50 per share, or about $2.9 billion, including the assumption of outstanding debt and liabilities. The purchase price is 67 percent higher than Supervalu’s closing price on Wednesday, according to Minnesota's Star Tribune. MarketWatch reported that shares of Supervalu rose 65 percent on Thursday after the acquisition was announced.

Goldman Sachs is financing the transaction.

The acquisition will expand UNFI’s customer base and open channels in which UNFI is under-represented, the company reported in a released statement. UNFI also will diversify its product offerings—adding meat and produce, for example, as well as private-label frozen foods and deli items— as a result of the move.

Steve Spinner, UNFI's chief executive officer and chairman, said in a released statement that Supervalu’s portfolio of fast-turning products complements UNFI’s position as a leading natural and organic foods distributor.

"This transaction accelerates UNFI's ‘Build out the Store’ growth strategy by immediately enhancing our product range, equipping us to bring an attractive, comprehensive product portfolio to an expanded universe of customers," Spinner said. “Together, we can provide our "better for you" products as well as other high-growth segments, improving customers' competitive advantages in a dynamic marketplace.”

UNFI will sell Supervalu’s retail business, including Cub Foods. The Star Tribune reported that retail accounted for about $4.6 billion of Supervalu’s $14 billion annual revenue. Supervalu is based in Eden Prairie, Minn.

The company also will benefit from having wider geographic reach and increased efficiencies. It plans to streamline processes to meet customers’ needs and reduce future capital expenditures, according to the statement.

Spinner will lead the combined organization, while UNFI COO Sean Griffin will oversee the integration of Supervalu into UNFI’s operations.

Supervalu CEO Mark Gross said in the statement, “The combination of UNFI and SUPERVALU provides a substantial premium and delivers certainty of value to our stockholders, meaningful benefits to our customers, expanded opportunities for our employees, and the ability for us and our vendors to efficiently serve a varied customer base.”

The Star Tribune reported that Supervalu’s stockholders were poised to vote at the Aug. 16 annual meeting on replacing the board. Blackwells Capital LLC of New York, which bought into Supervalu last year, wanted the board to sell the retail stores.

In addition to Cub Foods, Supervalu operates the Shoppers chain, Shop’n Save, Farm Fresh and Hornbacher in various areas of the country. The company started out as a food distribution company, Winston and Newell, in the 1920s.  

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