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 Monday, Sept. 1, the 244th day of 2014. There are 121 days left in the year.
1864 -- 150 years ago: We are informed by J.H. Hull that the reason the street sprinkler was not at work yesterday settling the dust on the streets, was because one of his horses was injured. 1889 -- 125 years ago: Bonnie McGregor, a fleet-footed stallion owned by S.W. Wheelock of this community, covered himself with glory at Lexington, Ky, when he ran a mile in 2:13 1/2. The horse's value was estimated as at least $50,000. 1914 -- 100 years ago: Troops are pouring into Paris to prepare for defense of the city. The German army is reported to be only 60 miles from the capital of France. 1939 -- 75 years ago: The German army has invaded Poland in undeclared warfare. Poland has appealed to Great Britain and France for aid. 1964 -- 50 years ago: Publication of a plant newspaper, the Farmall Works News, has been launched at the Rock Island IHC factory and replaces a managerial newsletter. 1989 -- 25 years ago: Officials predict Monday's Rock Island Labor Parade will be the biggest and best ever. Last minute work continues on floats and costumes for the parade, which steps off a 9:30 a.m.