UPDATE: Supervalu's stock prices fell Monday after a Dow Jones story indicated that the company is not in serious sale talks at the time, according to Seeking Alpha.
Dive Brief:
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Bloomberg published a story Friday stating Supervalu is reportedly working with advisers on a possible sale of the company, among other options. The company has not publicly weighed in on the matter.
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The move comes as the retailer/wholesaler has faced mounting pressure from Blackwells Capital, the New York investment management firm that owns a 4.35% stake in Supervalu, to sell off its assets.
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Blackwells has taken its campaign public, and recently launched a proxy fight by nominating six directors for election to Supervalu's board.
Dive Insight:
This latest sale rumor appeals to Wall Street, with shares jumping 10% last Friday, amounting to a market valuation of about $638 million. However, shares fell on Monday as a competing report indicated the retailer/wholesaler is not, in fact, exploring a sale.
The company is already selling off its Farm Fresh stores and could decide to shed all of its retail operations since the wholesale business is posting much healthier numbers and appears to offer a more solid future. Supervalu bought Associated of Grocers of Florida this past fall for $180 million, extending its geographic reach in the Southeast. And, last summer, it merged with California-based Unified Grocers in a $375-million deal which added a significant presence along the West Coast.
Both of those moves clearly signaled the company's intention to focus more on the wholesale side of its operations. But Blackwells suggested that Supervalu sell off the wholesale division, too. The investor has also indicated that it would like to see Supervalu sell and then lease back some of its real estate holdings.
Bloomberg speculated that another large retailer or perhaps a private equity fund might be interested given Supervalu's size and market position. The stronger wholesale business, coupled with a low stock price, could make Supervalu a more attractive acquisition target for SpartanNash and United Natural Foods. C&S Wholesale Grocers, the largest wholesaler in the U.S., has also been mentioned as a possible suitor in the past.
Acquiring Supervalu would also mean taking on the company’s approximately $2.5 billion in debt. Divesting its remaining retail operations could ease that situation and make Supervalu even more attractive as an acquisition target for a buyer less interested in running a supermarket business or having to sell it later on.
Even though Supervalu may appear to be moving in Blackwells' preferred direction, it has also recently defended its management decisions during the past two years by emphasizing that a transformation is "well underway and showing results." The company said its wholesale business is up to nearly $13 billion in sales, or about 75% of its annual total, and that new leadership has been brought on board to improve operations and better align the retail and wholesale sides. However, given the level of impatience indicated by the escalating war of words, that's not likely to satisfy Blackwells anymore than the Farm Fresh announcement did.
It's not clear whether anything substantive will come from all this dissension, but it's certain to make for a lively annual meeting, once that date is set. The past three have all been held in July.