business news in context, analysis with attitude

The Wall Street Journal reports that Supervalu has been trying to sell its Shaws chain in New England for the past few months, but have been unable to find anyone interested in acquiring the company for a price that it finds acceptable.

Supervalu has already sold off the Shaws stores it used to own in Connecticut, as well as the upmarket Bristol Farms chain in California, as it pursues what appears to be a value-driven strategy keyed to CEO Craig Herkert’s affection for the Save-A-Lot limited assortment format. In addition, analysts have believed that Supervalu was interested in selling off assets as a way of retiring at least some of its debt. In addition, there have been rumors that Supervalu itself could be on the sales block.

The Journal says that the remaining 175 Shaws stores in New England have an asset value of about $1 billion.

According to the Journal story, “Supervalu partnered with CVS Corp. and an investment group led by Cerberus Capital Management for the Albertson’s deal, taking on about $6 billion in debt as part of the transaction.

“Supervalu’s acquisition of its larger rival gave it more than 2,600 stores across the country. Besides its name sake, Albertson’s also operated Acme Markets, Bristol Farms, Star Markets and Jewel-Osco.

“But the financial crisis hit supermarkets hard, and a slow economy and intense price competition continue to plague grocery store chains. Supervalu has also been struggling with its debt load. Moody’s recently cut its rating on Supervalu further into junk territory. Wall Street has called for Supervalu to shed assets to pay down some of its debt.”
KC's View:
As I think has been pointed out here in MNB more than once in recent months, the number of people who believed that Supervalu was not interesting in selling the rest of Shaws could have had a convention in a phone booth. (For young readers who have no idea what a phone booth is, please Google it.)

The other question I keep hearing is this: How long a rope does Craig Herkert have?