Supervalu in $1.36 billion cash deal to sell Save-A-Lot

Supervalu has found a buyer for its discount grocery business, Save-A-Lot.



Supervalu agreed to sell Save-A-Lot to Onex Corporation, a Toronto-based private equity firm, for $1.365 billion in cash. As part of the agreement, Supervalu will provide professional services to Save-A-Lot for five years.



The sale is expected to be completed by January 31, 2017, subject to regulatory approvals and other customary closing conditions.



In January, Supervalu announced it was considering spinning off Save-A-Lot, which has approximately 1,370 stores, into a publicly traded company in order to focus on growing its grocery wholesale business. Supervalu decided to explore an outright sale of the chain after receiving interest from several private equity firms, according to Reuters, with Onex making the best offer in an auction for Save-A-Lot, Reuters reported in September.



“Today’s announcement is the result of a thorough process to maximize the value of the Save-A-Lot business and best position Supervalu for future success,” said Supervalu non-executive chairman of the board, Jerry Storch. “We are confident that this transaction will create exciting opportunities for both Supervalu and Save-A-Lot.”



Supervalu said it expects to use the net proceeds from the sale to prepay at least $750 million against its outstanding term loan balance. The company intends to use the remaining net sale proceeds to further reduce debt and improve its capital structure, as well as to fund corporate and growth initiatives.