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Following sale, Supervalu’s remaining businesses will be ‘in great shape’ CEO says

BY Michael Johnsen

MINNEAPOLIS — The sale of 877 stores to Cerberus Capital Management will help Supervalu re-energize its remaining three businesses, current Supervalu president and CEO Wayne Sales told analysts Thursday morning. "What this means … is the company is smaller," Sales said. "And we exit with a much smaller balance sheet to ensure liquidity going forward," he said. This sale will not be followed by any further divestitures, Sales said. "We’re not shopping any other assets."

Most important, Sales said, it provides for some stability to the company’s wholesaler business. "When you take Supervalu apart and you look at the most recent results … it provided some uncertainty to independent grocers," Sales said. The improved liquidity should settle those uncertainties. Save-A-Lot is still the jewel in the crown for Supervalu, perhaps more so now than before. "That will be a huge growth opportunity for us," Sales said. The company will focus on simplifying operations across Save-A-Lot and improving its private label mix from 57% to 70%, Sales said. 

And that leaves Supervalu in a better competitive position, Sales suggested. "The retail stores themselves are in great shape," he said. "[Across our] distribution centers, we have significant capacity to support our growth, [and] we see growth capital being placed in [our Save-A-Lot] businesses."

While the focus of Thursday’s conference call focused on the particulars of the transaction, Supervalu did report third quarter fiscal 2013 net sales of $7.9 billion, down 5% as compared to the year-ago period. The decrease in net sales primarily reflected a decline in identical store sales of 4.5% across the company’s retail food operations Retail Food and a same-store sales decline of 4.1% across its Save-A-Lot network. 

Third quarter retail food net sales were $5 billion, a decline of 7.4%, primarily reflecting an identical store sales decline of 4.5% and the disposition of a majority of the company’s retail fuel centers, which contributed $112 million in sales in the third quarter of fiscal 2012.

Third quarter Save-A-Lot net sales totaled $966 million, a decrease of 1.6%, reflecting the impact from network identical store sales of negative 4.1% and recently announced store closures partially offset by the benefit from 20 net new stores being operated at the end of the third quarter of fiscal 2013.

And Supervalu’s independent business wholesaler net sales were relatively flat at $2 billion for the third quarter. 

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FDA calls for lower dosage in some insomnia drugs

BY DSN STAFF

SILVER SPRING, Md. — The Food and Drug Administration is ordering the makers of several sleep drugs to lower the recommended dosage due to the risk that they can impair patients the morning after, the agency said Thursday.

The FDA announced that it was requiring the manufacturers of drugs containing the active ingredient zolpidem to lower the current recommended dosage in light of new data showing that the morning after use, the drug can remain in the blood in sufficient quantities to impair activities that require alertness, such as driving.

According to the agency’s recommendation, the dosage for women should be lowered from 10 mg to 5 mg for immediate-release drugs and from 12.5 mg to 6.25 mg for extended-release formulations. For men, doctors should consider prescribing these lower doses, the FDA said. The higher and lower doses are both currently available on the market.

"To decrease the potential risk of impairment with all insomnia drugs, healthcare professionals should prescribe, and patients should take, the lowest dose capable of treating the patient’s insomnia," FDA Office of Drug Evaluation I director Ellis Unger said. "Patients who must drive in the morning or perform some other activity requiring full alertness should talk to their healthcare professional about whether their sleep medicine is appropriate."

Zolpidem is the active ingredient of Sanofi’s Ambien and Ambien CR, Meda Pharmaceuticals’ Edluar and NovaDel Pharma’s Zolpimist, as well as several generics.


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Supervalu sells 877 stores, reuniting Albertsons under one operator

BY Michael Johnsen

MINNEAPOLIS — In a move that will reunite all Albertsons stores under one operator, Supervalu on Thursday morning announced a definitive agreement under which it will sell 877 stores across the Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market banners and related Osco and Sav-on in-store pharmacies to AB Acquisition, an affiliate of Cerberus Capital Management, in a transaction valued at $3.3 billion.

Following the sale, Supervalu will consist of its wholesaler business, which serves 1,950 stores across the country; Save-A-Lot, the largest hard discount grocery chain in the United States, with approximately 1,300 stores across 35 states; and Supervalu’s regional retail food banners Cub, Farm Fresh, Shoppers, Shop ‘n Save and Hornbacher’s. Across these three revenue streams, the new Supervalu is expected to generate annual revenues in excess of $17 billion. Going forward, Supervalu will be concentrating on right-sizing its operations and maximizing efficiencies, the company noted. 

The sale will consist of the acquisition by AB Acquisition of the stock of New Albertsons, a wholly-owned subsidiary of Supervalu, which owns the banners, for $100 million in cash. New Albertsons will be sold to AB Acquisition subject to approximately $3.2 billion in debt, which will be retained by New Albertsons. As part of the transaction, AB Acquisition-owned Albertsons will reunite its Albertsons stores with the acquired NAI Albertsons stores.

In addition to the sale, within 10 business a newly-formed acquisition entity owned by a Cerberus-led investor consortium called Symphony Investors will conduct a tender offer for up to 30% of Supervalu’s outstanding common stock at a purchase price of $4 per share in cash. The tender offer represents a 50% premium to Supervalu 30-day average closing share price as of Jan. 9.

"I cannot stress enough that the sale and tender offer collectively make Supervalu a strong company," Supervalu’s current president and CEO Wayne Sales told analysts in a conference call Thursday morning. "I will leave the CEO position knowing we have made good process following the turnaround effort."

Following the closing of the transactions, Supervalu will name grocery retail veteran Sam Duncan president and CEO, replacing Sales. In addition, effective upon the closing of the transactions, five current Supervalu directors will resign. Immediately following the closing of the transactions, the size of the board will be reduced to seven members from the current 10 members. This seven member Board will consist of five current Supervalu directors and two board members designated by Symphony Investors, one of whom is Robert Miller, former Rite Aid chairman and current president and CEO of Albertsons, who will serve as non-executive chairman of the board. Miller and Duncan have worked together before at Fred Meyer. Following the completion of a search process, the board will be increased to a size of 11 directors, with the four new directors to consist of Duncan, an additional director appointed by Symphony Investors and two additional independent board members to be selected by the initial seven directors.

Duncan is expected to assume Supervalu leadership in late February. He most recently served from 2005 to 2011 as chairman, CEO and president of OfficeMax. Prior to joining OfficeMax, Duncan served from 2002 to 2005 as president and CEO of ShopKo Stores.

Miller presently serves as the CEO of Albertsons, a North American grocery company with approximately 192 retail grocery and drug stores across eight states. Albertsons is majority-owned by Cerberus Capital Management. Prior to joining Albertsons in 2006, Miller was chairman of Wild Oats Markets based in Boulder, Colo. In December of 1999, Miller was hired as chairman and CEO of Rite Aid, and led a successful turnaround of the nearly-bankrupt pharmacy operation. He continued to serve as chairman of Rite Aid until June 2007 and as director until 2011.

 You can read more about Supervalu’s third-quarter conference call here.

 

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