U.S. grocery retailer Supervalu Inc. (Minnesota) said it will sell itself to Rhode Island-based United Natural Foods Inc. (UNFI), a distributor of natural and organic foods, for $1.35 billion, after coming under pressure from shareholders to explore a sale, according to Reuters.
UNFI is the primary supplier for Amazon.com, Inc.’s Texas-based grocery chain Whole Foods Market. It said that the deal would help it diversify its customer base and portfolio. The acquisition could also help it alleviate pressure on rising food distribution costs by tapping Supervalu’s network.
“Combining our leading position in natural and organic foods with Supervalu’s presence in fast-turning products makes us the partner of choice for a broader range of customers,” UNFI Chief Executive Officer Steve Spinner said in a statement.
UNFI agreed to pay $32.50 per share in cash, a 67 percent premium to Supervalu’s July 25 closing price. UNFI shares dropped 14 percent to $35.40 in morning trading in New York on July 26, as UNFI investors baulked at the hefty price tag.
The acquisition price was pushed up because UNFI was engaged in a bidding war for Supervalu against C&S Wholesale Grocers (New Hampshire), the largest U.S. wholesale grocery supply company, according to people familiar with the sale negotiations who requested anonymity to discuss them.
UNFI said it plans to sell some Supervalu retail assets after the deal, which is scheduled to close in the fourth quarter of 2018.
United Natural will fund the acquisition with debt. If the assumption of outstanding debt and liabilities is included, the deal values Supervalu at $2.9 billion.
Supervalu was under pressure to sell itself from investment firm Blackwells Capital LLC (New York), which earlier this year announced a challenge to the company’s board.
