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SuperValu Inc. shares climbed 65% on Thursday after United Natural Foods Inc. announced it had agreed to acquire the food and grocery chain in a deal valued at about 2, $ 9 billion, including debt.
United Natural Foods
UNFI, -15.06%
which specializes in healthier food options, distributes more than 110,000 products to more than 43,000 customers, including natural health stores and conventional supermarkets . The company pays $ 32.50 per SuperValu share
SVU, + 64.27%
a premium of 67% over the closing price of the action on Wednesday.
The agreement will expand its lineup and help the company reach a wider range of customers, said Steve Spinner, chief executive officer of UNFI, in a statement. Mr. Spinner will lead the merged company and Sean Griffin, chief operating officer of the company, was chosen to lead the SuperValu integration effort. UNFI announced that it would leave the retail business of SuperValu, which includes 3,000 stores. The company has spent more than two years implementing a transformation plan aimed at getting back to its roots.
UNFI expects the agreement to generate cost synergies of more than $ 175 million a year. to take place in the fourth quarter. After the first year, it is expected to increase adjusted earnings per share and contribute to double-digit adjusted EPS growth after that date. "This combination provides Unified with a significant scale that allows us to serve the country's most innovative and dynamic retailers and e-merchants," Spinner told analysts at a conference call, according to a transcript of FactSet. "Our industry continues to scale scale, efficiency, merchandising, services and product selection and are what our customers need and want. This combination is what our retailers require. "
Moody's stated that the agreement was strategic at a time of increasing competition in the food retailing industry." Amazon.com Inc.
AMZN, -2.82%
The acquisition of Whole Foods created a pocket-sized giant in the grocery category that put pressure on competitors.
The UNFI-SuperValu Agreement "gives more credence to our assessment that wholesale food distribution activities must now evolve more than ever to counteract price and competitive pressure across the food industry ", said Mickey Chadha, vice president of Moody's. comment.
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"With extremely thin margins at SuperValu and hard-to-find organic growth opportunities due to the challenging business environment for its wholesale distribution customers, who are primarily independent food retailers or small retail grocery stores. are challenged in the current promotional context, it makes sense to partner with UNFI, which accounts for more than 35% of its sales in grocery stores specializing in fast-growing organic and natural foods, including Whole Foods. " .
SuperValu was under pressure from activist shareholder Blackwells Capital LLC to improve its financial performance. On Tuesday, Blackwells issued a presentation calling on shareholders to vote for its six board nominees to ensure the change and unlock the value.
United Natural Foods shares lost 13% on news, and are now down 28% for 2018, while the S & P 500 index
SPX, -0.31%
gained 6.3%.
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