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After more than a year of lingering speculation, the protracted sale of Supervalu's productive Save-A-Lot subsidiary has come to a close. An affiliate of Onex Corp., based in Ontario, Canada, has purchased the business for $1.365 billion in cash, subject to customary closing adjustments. The deal is expected to close by the end of January 2017. As part of the sale, Supervalu and Save-A-Lot will enter into a five-year professional services agreement.
The “thorough process” of selling the retail business was to “best position Supervalu for future success,” said Jerry Storch, the company’s nonexecutive chairman of the board. “Supervalu is successfully executing on its long-term strategic vision and positioning the company for continued growth and value creation. We are confident that this transaction will create exciting opportunities for both Supervalu and Save-A-Lot.”
The sale was the next step in Supervalu’s transformation, creating “a stronger balance sheet that will allow us to further build on our core strengths and growth opportunities,” said Mark Gross, the company's president and CEO.
Supervalu expects to use the proceeds of the sale to pay about $750 million against its outstanding term-loan balance. The remaining balance will be used to further reduce debt and improve capital structure, as well as fund corporate and growth initiatives. The wholesaler had previously cut its full-year profit guidance for fiscal 2017.
The five-year services agreement between the Eden Prairie, Minn.-based wholesaler and the retail stores includes support functions such as cloud service, merchandising technology, payroll, finance, and other technology and hosting services.
Save-A-Lot currently operates 472 corporate stores while servicing and supplying another 896 licensee-owned stores, reaching more than 5 million customers each week.