Supervalu Inc.’s recently revealed pending acquisition of Associated Grocers of Florida, mere months after it purchased Unified Grocers, has prompted longtime supermarket observer Burt Flickinger III, managing director of New York-based Strategic Resource Group, to describe the Eden Prairie, Minn.-based retailer-wholesaler as having pulled off “the two most important acquisitions in the U.S. and Canada in decades.”
Certainly, the transactions were the company’s “two best acquisitions in at least 25 years,” he observed. Going even further back, Flickinger cited Supervalu’s 1971 merger with Shopko, which has since been spun off into its own company, as a comparably audacious move.
He asserted that the two recent “sensational back-to-back deals” were “decisively and opportunistically” engineered by Supervalu President and CEO Mark Gross, who beat out such rivals as C&S Wholesale Grocers and Associated Wholesale Grocers to acquire the companies for “bargain basement prices.” Flickinger noted that Pompano Beach, Fla.-based Associated Grocers was actually worth between $215 million on the low end and a quarter of a billion on the high end, meaning that Supervalu’s $180 million purchase price for the regional family-owned wholesaler represented a 25 percent to 35 percent discount on valuation dollars.
What’s more, the Associated Grocers transaction positions Supervalu to become the most important wholesaler for the lucrative Hispanic and Asian-American markets, according to Flickinger, adding that Latinos are responsible for 90 percent of total U.S. population growth, while Asians make up the balance of that growth.
He went on to explain that both acquisitions, which he characterized as “crown jewels,” gave Supervalu “unprecedented procurement power,” both of consumer packaged goods and private label items, enabling them to lower prices in their stores in a bid to be more competitive, which would in turn lead to increased customer counts and greater profitability. Flickinger said he believed that with its larger scale and financial heft, the company would be able to grow the acquired companies beyond what their original management teams had been able to achieve.
He also predicted that Supervalu wasn’t done acquiring companies: In Flickinger’s opinion, it “will continue to snap up other regional ROFDA [Retailer Owned Food Distributors & Associates] members,” eventually enabling it to “regain the No. 1 position in North American wholesale for the first time in 15 years.”