Natural and organic products distributor United Natural Foods Inc. (UNFI) has agreed to acquire grocery retailer Supervalu Inc. for $2.9 billion.
UNFI, which distributes to Whole Foods Market and other grocery chains, will pay $32.50 per share in cash for Supervalu, according to a joint statement. The deal includes the assumption of outstanding debt and liabilities.
Steve Spinner, UNFI’s current CEO, will lead the combined entity. Sean Griffin, UNFI chief operating officer, will head the Supervalu integration efforts and lead an integration committee comprised of executives from both companies.
Reasons cited for the acquisition were a diversified customer base, more cross-selling opportunities, larger market reach and scale, and an estimated $175 million in efficiency savings over the first three years.
Headquartered in Minneapolis, Supervalu is one of the largest grocery wholesalers and retailers in the U.S., distributing to 3,437 stores. Supervalu operates 29 distribution centers serving 48 states and 114 grocery stores. Fiscal-year 2018 annual sales were approximately $14 billion.
UNFI specializes in “healthier food options” and distributes more than 110,000 products to 43,000 customer locations including natural product superstores, independent retailers, conventional supermarket chains, e-commerce retailers and food service customers.
“We have been executing an ambitious strategic transformation for over two years,” says,” says Mark Gross, Supervalu’s chief executive officer. “We believe that this transaction is the best and natural next step for our stockholders, customers and employees.”
The transaction has been approved by both companies’ boards of directors and is subject to antitrust approvals, shareholder approval and other closing conditions. The acquisition is expected to close in the fourth quarter of 2018.
Ecovia Intelligence Comment
It will be interesting to see how Supervalu will be integrated into UNFI’s operations. Since UNFI’s main business is distribution (import and wholesale), the acquisition is considered a move up the value chain. Will Supervalu start competing more with Whole Foods Market and other natural food retailers? Or, will UNFI build an online business to compete with Amazon? How will the acquisition affect UNFI’s existing customer base, considering there are now competing interests?
Source: News Release / Ecovia Intelligence (01/08)