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Under Pressure from Shareholders, SuperValu Hires CBRE to Shop Distribution Centers

Move Comes Amid Calls to Breakup or Sell Major Food Distributor
February 8, 2018
A SuperValu distribution center in Hopkins, MN

Pressured by shareholders to unlock the capital tied up in its owned real estate, SuperValu Inc. (NYSE:SVU) disclosed this morning it has hired CBRE to assist it in evaluating the potential sale/leaseback of its distribution network.

The move follows yesterday's announcement from Blackwells Capital LLC, a New York alternative investment management firm, that it intends to nominate a new slate of directors for SuperValu and called for a break-up or sale of the grocery store retailer to boost its share value. Blackwells has acquired about 4.35% of SuperValu's outstanding common shares.

The Eden Prarie, MN-based SuperValu is one of the largest grocery wholesaler distributors and grocery retailers in the U.S. with annual sales of approximately $16 billion.

As of year-end 2016, SuperValu owned nearly 11 million square feet of distribution centers across 18 U.S. markets. In addition, it acquired distribution centers in three other markets last year. It also owns about 1.8 million square feet of grocery store space.

Blackwells estimates the value of SuperValu's owned real estate at $1.8 billion. The supermarket chain carries the properties on its books at a value of $1.3 billion.

The company's closing stock price yesterday was $15.40/share, which carries a market capitalization value of $591 million. Three years ago, the company's stock was trading at more than $83/share.

"Over the past few months, members of SuperValu's board and management team have had several discussions and meetings with representatives of Blackwells," SuperValu said in a prepared release. "Discussions encompassed a variety of topics pertaining to the business and the company's ongoing initiatives as well as our board refreshment efforts - initiatives that have been underway substantially since before Blackwells became a stockholder. Despite our efforts to reach a constructive path forward and to discuss overlapping objectives, Blackwells has decided to threaten an unnecessary and counterproductive proxy contest."

SuperValu has been trying to transform into more of a wholesale company focused on the distribution of consumable products. Sales from SuperValu's wholesale operations are now approximately 75% of its total annual sales, up from approximately 44% only two years ago.

At the same time, it has continued to prune its retail network including pursuing store sales and closures for underperforming locations while exploring options for specific banners. For example, last year it completed the sale of its Save-A-Lot banner for $1.3 billion.

SuperValu said that it is confident its ongoing efforts are driving growth.

In hiring CBRE to help monetize its distribution center properties, SuperValu stipulated that any transaction must allow for the continued operational and financial flexibility of its logistics network. It plans to use proceeds from any sale to reduce outstanding debt.

SuperValu's network of 3,324 stores includes 3,111 wholesale primary stores operated by customers of its food distribution business and 213 traditional retail grocery stores.

The following is a list of Supervalu's distribution centers as of February 2017.

Location Owned SF

  • Hopkins, MN 1,847,000
  • Mechanicsville, VA 1,192,000
  • Champaign, IL 893,000
  • Green Bay, WI 433,000
  • Fort Wayne, IN 856,000
  • Quincy, FL 787,000
  • Pittsburgh, PA 771,000
  • Tacoma, WA 683,000
  • Anniston, AL 456,000
  • St. Louis, MO 547,000
  • Indianola, MS 540,000
  • Stevens Point, WI 431,000
  • Fargo, ND 324,000
  • Oglesby, IL 321,000
  • Billings, MT 239,000
  • Anniston, AL 231,000
  • Bismarck, ND 210,000
  • West Newell, IL 174,000

    In March 2017, Supervalu acquired a 732,000-square-foot distribution center in Harrisburg, PA, to eventually replace the Lancaster, PA. In 2017, it also acquire distribution centers in Pompano Beach, FL, and Joliet, IL.

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