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, May 18, the 138th day of 2013. There are 227 days left in the year. 1863 -- 150 years ago: A large variety of children's wagons and gigs have arrived in thecity and are being sold at war prices. 1888 -- 125 years ago: All Rock Island retail houses, with the exception of a clothingstore and a jewelry store, have agreed to early closing hours during the summer months.The store will be closed at 8 p.m. 1913 -- 100 years ago: Baseball enthusiasts in Rock Island are attempting to raise$20,000 to keep the Island City Park open, despite the fact that the city has no franchise inorganized baseball this year. 1938 -- 75 years ago: The organization of a third rural young people's unit will beundertaken tomorrow night at the Milan Presbyterian Church, with Mrs. Mildred K.Wellman, home advisor, and Robert Smith, county farm adviser in charge. 1963 -- 50 years ago: Deere & Co. will begin a "big switch" on its telephone systemMonday morning. The extension numbers of all 1,600 telephones on the firm's EastMoline and Moline exchanges will be changed Monday morning. 1988 -- 25 years ago: East Moline's June Jamboree VI -- Nostalgia Days, will seemlike a '60s revival with the appearance of stars like Bobby Vee, Freddie Cannon, PeterNoone, Turtles, The Grass Roots and Lou Christie. This year's festival has beenexpanded to five days, June 22-26, at the Northeast Park complex.