Reuters — Food retailer and wholesaler Supervalu Inc. said it will sell its Save-A-Lot business to Canadian private equity firm Onex Corp. for US$1.37 billion rather than spinning off the discount grocery chain as previously planned, the companies said on Monday.
Eden Prairie, Minnesota-based Supervalu had been looking to separate the more profitable division, which generates about a quarter of the company’s sales, from its slower-growing grocery wholesale and food retail businesses as bigger rivals such as Wal-Mart Stores increase their focus on groceries.
Supervalu said it will enter into a five-year agreement to provide Save-A-Lot with some services and support functions as part of the deal.
Save-A-Lot has a network of about 1,370 company-owned and licensed stores across 37 states in the U.S. and in the Caribbean and Central America.
Onex, whose other holdings in the U.S. food sector include dining chains Jack’s Family Restaurants and CiCi’s Pizza, made the best offer in an auction for Save-A-Lot, Reuters reported in September.
Supervalu decided to explore an outright sale of the discount grocery chain after receiving interest from several private equity firms, Reuters reported in December.
Supervalu said on Monday it expects to use the sale proceeds to prepay at least $750 million of its outstanding term loan.
The deal is expected to close by Jan. 31, the companies said.
— Reporting for Reuters by Sruthi Ramakrishnan in Bangalore and Lauren Hirsch in New York.