SuperValu Inc. (NYSE: SVU) was up nearly 20% last week, largely on buyout speculation. Buyout firm Cerberus Capital Management is the likely frontrunner to take over the third-largest U.S. supermarket chain.

SuperValu has been closing stores and cutting costs due to a loss of customers to competitors like Wal-Mart Stores Inc. (NYSE: WMT) and Kroger Co. (NYSE: KR). It announced Monday that it was selling its Midwest distribution center near Kenosha, Wis., to competitor Meijer Inc. But SuperValu is still struggling with $6 billion in long-term debt and pension liabilities.

Despite its diverse brands and store chains, SuperValu would prefer a buyer take the entire company. But a breakup may be in the cards. Its earlier efforts to sell the company as a whole failed to generate much buyer interest. Dutch company Ahold is reportedly interested in the Shoppers chain, while C&S Wholesale is interested in Supervalu’s distribution business. Private equity firm KKR (NYSE: KKR) is said to be contemplating a bid for the Save-A-Lot chain.

Cerberus is in talks to line up several billion dollars in debt financing from banks including J.P. Morgan Chase & Co. (NYSE: JPM) and Bank of America Corp. (NYSE: BAC), and may also invest another $900 million in equity. The strategy is expected to be similar to when Cerberus took the Albertsons supermarket chain private in 2006, divesting itself of most of the assets but holding on to others.

SuperValu shares closed at $3.01 on Friday, in a 52-week range of $1.68 to $8.57.

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