(Recasts first paragraph, adds stock price, advisors)
Oct 17 Food retailer and wholesaler Supervalu
Inc said it will sell its Save-A-Lot business to
Canadian private equity firm Onex Corp for $1.37
billion rather than spinning off the discount grocery chain as
previously planned, the companies said on Monday.
Eden Prairie, Minnesota-based Supervalu had been looking to
separate the more profitable division, which generates about a
quarter of the company's sales, from its slower-growing grocery
wholesale and food retail businesses as bigger rivals such as
Wal-Mart Stores Inc increase their focus on groceries.
Supervalu stock gained about 8 percent in Monday morning
Supervalu said it will enter into a five-year agreement to
provide Save-A-Lot with some services and support functions as
part of the deal.
Save-A-Lot has a network of about 1,370 company-owned and
licensed stores across 37 states in the United States, the
Caribbean and Central America.
Onex made the best offer in an auction for Save-A-Lot,
Reuters reported in September.
Supervalu decided to explore an outright sale of the
discount grocery chain after receiving interest from several
private equity firms, Reuters reported in December.
Supervalu said on Monday it expects to use the sale proceeds
to prepay at least $750 million of its outstanding term loan.
The deal is expected to close by Jan. 31, the companies
Barclays Capital Inc and Greenhill & Co LLC were financial
advisers to Supervalu, while Wachtell, Lipton, Rosen & Katz
acted as legal adviser.
Citigroup was sole advisor to Onex and led the financing.
(Reporting by Sruthi Ramakrishnan in Bengaluru and Lauren
Hirsch in New York; Editing by Sriraj Kalluvila and Will Dunham)