Save-A-Lot Courts Interest from Private Equity Groups

Private equity firms are preparing offers to purchase Supervalu’s Save-A-Lot business, which may make it more attractive for the Eden Prairie, Minn.-based wholesaler to sell the discount grocery chain outright rather than spinning it off to Supervalu shareholders, according to unnamed industry sources in a Reuters report.

The firms participating in the auction include Advent International Corp.; KKR & Co. LP; Clayton, Dubilier & Rice LLC; TPG Capital LP; Onex Corp.; and Thomas H. Lee Partners LP. Some of the offers could value Save-A-Lot at $1.8 billion, the sources said. Supervalu is expected to conclude the auction in the next few weeks and then make a final decision about the future of Save-A-Lot.

After Reuters reported on the preparation of the offers on July 29, Supervalu shares rose 7 percent, and ended the day with a price of $4.88, an increase of 4.9 percent.

Supervalu revealed that it was planning to spin off Save-A-Lot a year ago, and six months later indicated that it may consider an outright sale after private equity firms expressed interest. According to Moody’s Investors Service, a sale would be preferable to a spin-off because a sale would allow Supervalu to pay down debt, which totaled $2.3 billion as of June 18.

In the year since the Save-A-Lot announcement, both the wholesaler and grocery chain have undergone significant management changes: Eric Claus joined the company as CEO of Save-A-Lot and Mark Gross came aboard as CEO of Supervalu.