Supervalu Asset Sales, Earnings Please Investors

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Retail grocery store chain Supervalu Inc. (NYSE: SVU) this morning reported third fiscal quarter adjusted diluted earnings per share (EPS) of $0.08 on sales of $7.9 billion. In the same period a year ago, the company reported adjusted EPS of $0.03 on sales of $8.3 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.05 on sales of $7.9 billion.

The bigger news, though, is that Supervalu has agreed to sell five of its brands to an affiliate of Cerberus Capital Management for $3.3 billion. The company’s Albertstons, Acme, Jewel-Osco, Shaw’s and Star Market stores plus in-store pharmacies under the Osco and Sav-on banners will go to Cerberus. Supervalu will receive just $100 million in cash; the remaining $3.2 billion is assumed debt. All told, 877 stores are included in the transaction.

Related to the asset sale, a Cerberus-led consortium will also initiate a tender offer at $4 per share for up to 30% of Supervalu’s outstanding stock. The price represents a premium of 50% to Supervalu’s average closing price for the past 30 days.

Supervalu will get a new CEO, Sam Duncan, who replaces current CEO Wayne Sales. As soon as the transaction closes, five current Supervalu directors will resign and the board will cut its membership from 10 to seven. Following a search process, the board will increase its membership to 11.

Supervalu’s shares are up nearly 15% before markets open this morning, at $3.49 in a 52-week range of $1.68 to $7.73.

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