NEW YORK (AP) — Supervalu Inc. is selling off five of its grocery chains, including Jewel-Osco and Albertson's, after years of being squeezed by intensifying competition.
The nation's No. 3 traditional supermarket operator said Thursday that the sale of 877 stores to an investor group led by Cerberus Capital Management also will include Acme, Shaw's and Star Market. The group already owns about 200 Albertson's in the South and Southwest.
Following the sale, Supervalu will focus on its Save-A-Lot discount stores, as well as its smaller regional chains - Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's. It will also keep its wholesale business that distributes groceries to stores.
The investor group will pay $100 million in cash for the stores, and the new company will assume $3.2 billion in existing debt. Cerberus will also offer to buy up to 30 percent of the remaining Supervalu for $4 per share after the deal closes.
Supervalu has struggled for years to turn around its business. The broader supermarket industry has been facing growing competition from big-box retailers such as Target, drugstore chains and dollar stores.
While bigger chains such as Kroger Co. have adapted by tweaking store formats and improving discount programs and product offerings, Supervalu has scrambled to keep pace.
This summer, Supervalu fired its CEO and tapped Chairman Wayne Sales to lead a turnaround. The company said at the time that it was reviewing its options, such as putting itself up for sale. In the meantime, it has closed stores and cut jobs as part of an effort to reduce costs.
Those efforts to fix its business will continue after the sale of its grocery chains is complete, the company said. Sam Duncan, who most recently was CEO of OfficeMax, will replace Sales as head of Supervalu after the deal closes.
On Thursday, Supervalu also reported a profit of $16 million, or 8 cents per share, for the third quarter. The results were boosted by a gain related to a settlement with credit card companies. A year ago, the company lost $750 million, or $3.54 per share.
However, total revenue for the period declined 5 percent to $7.9 billion. Sales at locations open at least a year fell 4.5 percent, and 4.1 percent at Save-A-Lot. Its profit margins also fell, in part because the company said it boosted promotions and cut prices for shoppers.
Bob Miller, who heads the Albertson's already owned by the Cerberus-led investment group, said the performance at the newly acquired Albertson's could be improved.
"In 2006, we acquired a set of stores that lacked investment and were in tough shape," he said, noting that those stores have grown into a "solid regional supermarket chain with growing sales."
A representative for the buyers noted that the transaction is still subject to approvals and declined to say whether any job cuts were planned for the newly acquired Albertson's, or whether the other chains would keep their names.
Supervalu's shares rose 15 percent to $3.51 in morning trading.
Today is Saturday, March 8, the 67th day of 2014. There are 298 days left in the year. 1864 -- 150 years ago: The price of board for single gentlemen occupying rooms in Davenport hotels has been raised to $10 per week. 1889 -- 125 years ago: Dr. J.W. Stewart was elected president of the Rock Island County Bible Society. 1914 -- 100 years ago: Mrs. I.O. Nothstein, Rock Island, was named president of the Woman's Home and Foreign Missionary Society of the Twin Cities. 1939 -- 75 years ago: Athel Young, wife of Chic Young, who draws the internationally famous "Blondie" comic strip, has been visiting her mother, Mrs. John Miller, in Rock Island for three weeks. The Youngs' infant son accompanied his mother. 1964 -- 50 years ago: 750 students from 30 northern Illinois high schools will take part in the Class D state finals music contest to be held next Saturday on the Augustana College campus. 1989 -- 25 years ago: A near capacity crowd shook the rafters at Wharton field House in Moline Tuesday night. When the decibel level returned to normal, Alleman's Pioneers had pulled out a 54-49 victory over the Orion Chargers. The win advanced Alleman into the Elite Eight for the first time in 25 years.