UNFI to Buy Supervalu for $2.9 Billion

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United Natural Foods Inc. (UNFI) and Supervalu Inc. announced they have entered into a definitive agreement under which UNFI will acquire Supervalu for $32.50 per share in cash, or approximately $2.9 billion, including the assumption of outstanding debt and liabilities.

“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,” said Steve Spinner, UNFI’s CEO and chairman, in a statement announcing the deal.

Spinner will lead the combined entity. Sean Griffin, UNFI COO, will lead the SuperValu integration efforts, post-close, and lead an integration committee comprised of executives from both companies to drive the implementation of best practices from each company and the delivery of important synergies and a rapid and smooth integration.

The deal is expected to close in Q4 and generate about $175 million in synergies. Over time, UNFI plans to divest SUPERVALU retail assets in a “thoughtful and economic manner,” the company said. It operates 114 retail stores under the brands Cub Foods, Shop ‘n Save, Farm Fresh, and Hornbacher’s. It acquired wholesalers Unified Grocers and Associated Grocers in 2017.

More than 35% of UNFI’s sales are to grocery stores that specialize in faster growing natural and organic foods, including Whole Foods.

The deal “gives more credence to our assessment that the wholesale food-distribution business needs scale now more than ever to counter the pricing and competitive pressure permeating throughout the food retailing business,” said Moody’s Vice President Mickey Chadha in commentary.

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