United Natural Foods has inked a deal to acquire SuperValu for about $1.3B, or about $2.9B including debt.
United Natural is the largest distributor of natural goods in North America, while SuperValu is the largest U.S. food wholesaler traded publicly.
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The sale comes at a time of tumult in the grocery store business. Price wars between some of the leading players in the game — Walmart, Aldi, Kroger — have been ongoing for some time now. For its part, The Kroger Co. is planning new strategies to up its game in a more digitally oriented consumer marketplace.
The upshot of uncertain times for the grocery business has been low margins and increasing costs, and the deal would augment United Natural's wholesale capacity as it deals with a spike in business since last year's acquisition of Whole Foods by Amazon, the Wall Street Journal reports. Whole Foods is United Natural's largest client.
Whole Foods accounts for roughly a third of United Natural's business via a contract that is set to expire in 2025, CNBC reports.
The SuperValu deal will presumably make United Natural less dependent on Whole Foods over time.
“This combination is what our retailers demand,” United Natural CEO Steven Spinner said Thursday during a conference call. Combining the company's position in natural foods with SuperValu's presence in fast-turning products will attract a broader range of customers, he said.
United Natural said it expects the acquisition to save the company about $175M in costs over the next three years through cost synergies.
Through its 18 distribution centers and specialty warehouses, SuperValu serves over 2,000 retailers in 39 states, shipping more than 600 million cases of product annually.
Not only will United Natural acquire that wholesale business, it is also buying SuperValu's retail business, which operates as Cub Foods and Shoppers. The buyer plans to divest those brands eventually.
United Natural expects to finance the transaction mostly with debt; Goldman Sachs has provided committed financing for the transaction. The offer of $32.50/share is a 67% premium over SuperValu’s stock price following the announcement Wednesday.
