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 Thursday, July 31, the 212th day of 2014. There are 153 days left in the year.
1864 -- 150 years ago: A corps of surgeons now occupies the new hospital quarters at the Garrison Hospital on the Rock Island Arsenal. A fence has been installed to enclose the prison hospital. 1889 -- 125 years ago: B. Winter has let a contract to Christ Schreiner for a two story brick building with a double store front on the south side of 3rd Avenue just west of 17th Street. The estimated cost was $4,500. 1914 -- 100 years ago: Germany sent simultaneous ultimatums to Russia and France, demanding that Russia suspend mobilization within 12 hours and demanding that France inform Germany within 18 hours. In the case of war between Germany and Russia, France would remain neutral. 1939 -- 75 years ago: Civil service offices at the post office and the Rock Island Arsenal were swamped as more than 700 youths sought 15 machinist apprenticeships at the Arsenal. 1964 -- 50 years ago: Last night, American Legion Post 246 in Moline figuratively handed over the trousers to a female ex-Marine and petticoat rule began. Olga Swanson, of Moline, was installed as the first woman commander of the post . 1989 -- 25 years ago: The Illinois Quad City Civic Center captured the excitement and interest of a convention of auditorium managers this weekend in Reno, Nev. Bill Adams, civic center authority chairman, said the 10,000-seat arena planned for downtown Moline has caught the eye of construction firms, suppliers, management teams and concession groups.