Supermarket operator Supervalu has agreed to sell its Save-A-Lot discount chain to Canadian private equity firm Onex Corp. for $1.37 billion in a move to focus on its grocery wholesale and food retail businesses.
Save-A-Lot, which has 1,370 stores mostly in the South and eastern U.S., accounts for about a quarter Supervalu’s $18 billion in annual sales and is its fastest-growing business. Supervalu had announced last year it would spin off Save-A-Lot but decided to explore an outright sale after receiving interest from several private equity firms.
“The sale of Save-A-Lot is another important step in Supervalu’s transformation,” CEO Mark Gross said in a news release. “It provides us with a stronger balance sheet that will allow us to further build on our core strengths and growth opportunities.”
The company said shedding Save-A-Lot will allow it to focus on its slower-growing grocery wholesale-distributing business, one of the largest in the country, and its other 200 stores. Wholesale has generated 45% of Supervalu’s sales the past several years, and that will grow to more than 60% after the divestiture of Save-A-Lot.
Supervalu’s other brands include Shop ‘n Save, Cub Foods, Hornbacher’s, Farm Fresh, and Shoppers.
“Selling groceries and supplies to other stores in its wholesale network partially insulates Supervalu from the thin profit margins of its day-to-day store operations,” The Wall Street Journal said, noting that like other grocers, “Supervalu has struggled to distinguish itself in the highly competitive retail industry.”
As part of the deal with Onex, Supervalu will provide Save-A-Lot with some services and support functions, including cloud services, merchandising technology, payroll, finance, and other technology and hosting services.
“Save-A-Lot is differentiated among its competitors in a growing segment of the industry,” Matt Ross, Onex managing director, said. “We’re excited to partner with the management team at Save-A-Lot, along with its licensed store owners, to support its growth for years to come.”