Supervalu announces sale of Save-A-Lot

Supervalu Inc., Eden Prairie, Minn., said it has entered into a definitive agreement whereby an affiliate of Toronto-based Onex Corp., a private equity investment firm and holding company, will acquire Supervalu’s Save-A-Lot business for $1.365 billion in cash, subject to customary closing adjustments. In connection with the sale, Supervalu and Earth City, Mo.-based Save-A-Lot will enter into a five-year professional services agreement. The sale of Save-A-Lot is expected to be completed by Jan. 31, 2017, according to Supervalu.

“Today’s announcement is the result of a thorough process to maximize the value of the Save-A-Lot business and best position Supervalu for future success,” said Jerry Storch, Supervalu’s non-executive chairman of the board, in a statement. “Supervalu is successfully executing on its long-term strategic vision and positioning the company for continued growth and value creation. We are confident that this transaction will create exciting opportunities for both Supervalu and Save-A-Lot.”

The sale of Save-A-Lot is another key step in Supervalu’s transformation, added Mark Gross, Supervalu’s president and CEO.

“It provides us with a stronger balance sheet that will allow us to further build on our core strengths and growth opportunities,” Gross said.

Under the terms of the professional services agreement, Supervalu will provide Save-A-Lot with certain services and support functions for its day-to-day operations, including cloud services, merchandising technology, and payroll, finance and other technology and hosting services, the company stated.

Supervalu said it expects to use the net proceeds from the sale to prepay at least $750 million against its outstanding term loan balance. The company added that it intends to use the remaining net sale proceeds to further reduce debt and improve its capital structure, as well as fund corporate and growth initiatives.