MINNEAPOLIS, Minn. and COMMERCE, Calif. – SUPERVALU Inc. agreed to acquire Commerce, California-based Unified Grocers Inc. in a transaction valued at approximately $375 million.
The transaction is expected to be accretive to earnings per share, excluding transition and integration costs as well as potential purchase accounting adjustments, in the first full fiscal year following closing which begins on Feb. 25, 2018. The wholesale grocery companies expect to close the transaction during the summer.
“We’re thrilled at the opportunity to bring together these two great organizations,” said Mark Gross, president and CEO of SUPERVALU. “By acquiring the Unified business, including gaining a wealth of expertise and talent, we will become a stronger and more efficient organization. The transaction will enhance our ability to help our customers better compete in the evolving grocery industry.”
Financing for the deal includes approximately $114 million in cash for 100 percent of the outstanding shares of Unified Grocers. SUPERVALU also agreed to pay off Unified Grocers’ outstanding net debt, which was about $261 million as of April 1. Shareholders of Unified stock must approve the merger, in addition to other customary closing conditions. Unified Grocers will be a wholly owned subsidiary of SUPERVALU once the merger is complete.
The combined companies will operate 24 distribution centers that supply customers in 46 states and serve a customer base of more than 3,000 stores. The merger is expected to open new avenues for growth such as the expansion of Unified Grocers’ Market Centre division which provides specialty and ethnic products to independent retailers.
“We’re also excited to serve Unified’s dynamic retailer base,” Gross added. “Unified’s members and customers operate some of the country’s most exciting and progressive Hispanic and multiple other ethnic formats, specialty, gourmet, natural/organic, price impact and traditional stores. They complement our existing customer base and we look forward to facilitating collaboration and innovation across such an impressive collection of creative merchants.”
The combined business is expected to achieve at least $60 million in cost synergies at the end of the third year after the transaction closes, primarily through consolidation of some back office functions, SUPERVALU said. The company also expects to incur transition and integration costs of up to $60 million within the first two years after the merger is complete.
“We believe this transaction will benefit the members and customers of Unified Grocers as they look for new and innovative ways to serve the communities in which they operate,” Unified Grocers’ president and CEO Bob Ling said. “SUPERVALU and Unified share a common vision of providing best-in-class services and products to the independent grocer. The cultural fit between SUPERVALU and Unified well positions the combined company to pursue a shared dedication and commitment to growth and innovation, providing increased value to customers.”
SUPERVALU is one of the largest grocery wholesalers and retailers in the United States with annual sales of approximately $13 billion. Unified Grocers, a retailer-owned wholesale grocery distributor that supplies independent retailers throughout the western US, reported annual sales of about $3.8 billion. SUPERVALU will maintain Unified Grocers’ headquarters in Commerce along with management and employees.