A Breakup of SuperValu May Be Unavoidable

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By Trey Thoelcke Published
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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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About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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