Deal to expand market for UNFI's 'better for you' products

PROVIDENCE, R.I. — United Natural Foods Inc. has agreed to acquire Minneapolis-based wholesaler and retailer Supervalu Inc. The deal is valued at about $2.9 billion, including the assumption of outstanding debt and liabilities.

UNFI says the transaction represents an opportunity to diversify its customer base and expand its market reach and scale. The company said it currently distributes over 110,000 products to more than 43,000 customer locations including natural product superstores, independent retailers, conventional supermarket chains, ecommerce retailers, and food service customers.

“This transaction accelerates UNFI’s “Build out the Store” growth strategy by immediately enhancing our product range, equipping us to bring an attractive, comprehensive product portfolio to an expanded universe of customers,” UNFI chairman and chief executive officer Steve Spinner said in a statement. “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. Together, we can provide our ‘better for you’ products as well as other high-growth segments, improving customers’ competitive advantages in a dynamic marketplace. These benefits, plus our increased efficiency and productivity, will enable us to create value for our shareholders, enhance opportunities for our suppliers, provide a broader assortment for our customers and create new prospects for our associates over the long term.”

Supervalu chief executive officer Mark Gross said the deal will deliver value to the company’s shareholders and “meaningful benefits” to its customers.

“We have been executing an ambitious strategic transformation for over two years,” Gross said. “We believe that this transaction is the best and natural next step for our stockholders, customers and employees. I am very proud of the unwavering commitment and focus of our employees in driving our strategic transformation and serving our customers. I am confident that, together, Supervalu and UNFI will be well positioned to succeed — and to help our customers succeed — in today’s grocery landscape.”

UNFI said its expects the combined companies to realize run rate cost synergies of more than $175 million by year three, and added that the  transaction is projected to be accretive to adjusted earnings per share in year one, with double-digit adjusted EPS growth that, excluding one-time costs.

Over time, UNFI plans to divest Supervalu’s retail assets in a “thoughtful and economic manner,” the company said. Plans call for Spinner to lead the combined entity, with UNFI chief operating officer leading the Supervalu integration efforts after the deal closes. Griffin will also lead an integration committee comprised of executives from both companies.

The deal is expected to close in the fourth quarter of this calendar year, pending the clearance of antitrust hurdles and the approval of Supervalu’s shareholders, as well as other customary closing conditions. The transaction has been approved by the boards of directors of both companies.