UNFI Completes SVU Purchase; Griffin To Oversee Wholesaler

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While it may have happened a bit sooner than many analysts predicted, the United Natural Foods, Inc. (UNFI) $2.9 billion acquisition (including debt) of Supervalu (SVU) was completed on October 22. The deal, in which the Providence, RI-based organic/natural/specialty/ethnic distributor agreed to pay SVU stockholders $32.50 per share, was first announced on July 25.

As part of UNFI’s future strategy, the company said it would sell the remaining Supervalu corporately-owned retail stores (slightly more than 100 stores). And just before presstime, it was announced that Giant/Martin’s, a unit of Ahold Delhaize USA, has acquired five of the eight remaining Shop ‘n Save stores in the Mid-Atlantic region. Those units are located in: Smithsburg, MD; Greencastle, PA; Berryville, VA; Hedgesville, WV; and Martinsburg, WV. All stores will trade as Martin’s Food Markets.

The UNFI acquisition of Supervalu was consummated in less than three months and UNFI’s integration plan is already underway.

“Today is an important milestone for UNFI. We will take the best from both businesses to create North America’s premier food wholesaler with significant scale, reach and choices for our customers. We are pleased to welcome our new colleagues from Supervalu as well as their customers and suppliers to UNFI. Our companies share customer-centric cultures and dedicated associates who are committed to continuous improvement, which will help drive our integration programs,” said Steve Spinner, UNFI’s chairman and chief executive.

“We are excited to continue to further build out the store to a more diverse customer base across the country, with both broad better-for-you natural, organic brands and fresh perimeter offerings, as we capitalize on opportunities to cross-sell and realize the benefits of the greater scale we now have as a combined company,” said UNFI veteran executive Sean Griffin, who will now serve as CEO of Supervalu and head of the integration committee. “Work has already begun for the Company to realize the significant projected run-rate cost synergies associated with this transaction – more than $175 million by year three and more than $185 million by year four – and we are committed to improving profitability into the future. We believe that we can achieve these targets and leverage scalable systems to streamline our processes, more efficiently meet the needs of our customers and reduce future capital expenditures. We look forward to providing an update on our integration efforts at our January 16, 2019 investor day.”

As head of the integration committee, Griffin will oversee a management team that includes executives from both companies to drive the implementation of best practices from each company and delivery of synergies as well as a rapid and smooth integration.

Spinner will lead the combined entity, supported by these UNFI executives, who will continue to report to him: Chris Testa, president of UNFI; Danielle Benedict, chief human resources officer; Eric Dorne, chief administrative officer and chief information officer; Paul Green, chief supply chain officer; Jill Sutton, chief legal officer, general counsel and corporate secretary; and Mike Zechmeister, chief financial officer.

Among the Supervalu executives who will remain with the new organization and report to Griffin are Anne Dament, executive VP – retail, marketing and private brands and Mike Stigers, executive VP- wholesale.

Supervalu CEO Mark Gross, as he stated previously, left the organization upon completion of the deal.

UNFI reiterated that the transaction will be primarily financed by debt. UNFI finalized new credit facility agreements including a $2.1 billion asset-based revolving credit facility, up to $1.475 billion of which will be made available at closing, and a $1.950 billion senior secured first lien term loan facility agreement consisting of a $1.8 billion term loan “B” tranche and a $150 million 364-day tranche. In addition, UNFI’s existing asset-based revolving credit facility was terminated upon close.

Combined, UNFI and Supervalu reported fiscal 2018 revenue of about $24.5 billion. Of UNFI’s $10.23 billion in sales, its largest customer — Whole Foods Market — accounted for $3.76 billion, or roughly 37 percent of total revenue.