Supervalu (SVU) is one of America’s largest grocery chains, but it only became so with its 2006 purchase of over
2,000 Albertson’s stores. Prior to that, Supervalu had been primarily a wholesale business, and it continues to remain a large grocery wholesaler.
Yesterday, the stock plummeted after hours when the company reported declining earnings, suspended its dividend, suspended guidance, restructured some debt, announced plans to cut both capital and operating expenses and pay down debt, and is reviewing strategic alternatives.
On a conference call, the Wall Street Journal reported,
Mr. Herkert didn’t rule out the suggestion by J.P. Morgan analyst Ken Goldman that the company spin off its Albertsons stores and all the debt that is associated with them.
Such a transaction would undo the 2006 Albertson’s purchase, but we view it as unlikely, especially given CEO Craig Herkert’s retail background as a Walmart (WMT) executive. If it did occur though, it wouldn’t be the first time Supervalu spun off a retail asset – in 1991, the company spun off Shopko, which was later taken private by Sun Capital Partners.
Disclosure: The author purchased some SVU this morning, and is considering buying additional debt, equity or options in SVU in the next 48 hours.
- Why SUPERVALU Has Crashed in 2012(fool.com)
- Supervalu halts dividend, weighs its options(marketwatch.com)
- Supervalu is Super Cheap as Free Cash Lures LBO: Real M&A – Bloomberg(bloomberg.com)
- Turnaround on Hold at SUPERVALU… Buyout As Well?(247wallst.com)
- Big Supervalu Miss Sends Shares Down 24%(blogs.barrons.com)