UNFI Sues Goldman Sachs For Breaching Pledges In SVU Deal

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United Natural Foods Inc. (UNFI) earlier this month filed a lawsuit against Goldman Sachs Group alleging the investor firm improperly advised the distributor in its $2.9 billion acquisition of Supervalu, extracting more than $200 million in advising the Providence, RI based wholesaler on the deal.

UNFI’s suit, filed February 4 in New York State Supreme Court, asserted that Manhattan-based Goldman Sachs put its interests ahead of that of a corporate client in order to control “all aspects of the transaction in order to extract millions in unjustifiable interest, fees and damage.”

A primary focus of the multi-count suit is a financing loan of approximately $2 billion that Goldman Sachs arranged for UNFI in the deal. The wholesaler charged that the investment bank arranged the financing in a way that hurt UNFI but benefited the financial firm and its hedge fund clients that had placed bets in the credit-default swap (CDS) market against Supervalu. They also accused Goldman of taking advantage of the deal’s terms to extract more money from UNFI.

Goldman Sachs denied UNFI’s claims and says it will defend itself against the suit.

The natural/organics/specialty/ethnic distributor which said it acquired Supervalu to become a full-service wholesaler, said it expected Goldman Sachs to provide advice and services to arrange its acquisition of Supervalu, which was announced in July of last year and closed on October 22.

“We feel we have an obligation to hold Goldman Sachs and others accountable for the ways in which they materially harmed UNFI and its shareholders in arranging the financing and managing related activities for our acquisition of Supervalu,” said a statement from UNFI.

Named defendants in UNFI’s complaint include Goldman Sachs and its principal executive overseeing the Supervalu transaction engagement, as well as Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated. UNFI filed similar claims separately against U.S. Bank for its collusive action, led by Goldman Sachs, in these matters.

UNFI’s complaint laid out how Goldman Sachs used its market power and influence to exploit the company as part of a concerted effort to maximize the bank’s profits. UNFI said it entrusted Goldman Sachs to provide a full range of transaction advisory services and to arrange a multi-billion-dollar loan for the acquisition of Supervalu. UNFI asserted that, while positioning itself as a trusted advisor on the one hand and its counter-party lender on the other, Goldman Sachs consolidated its command over all aspects of the transaction in order to extract millions in unjustifiable interest, fees, and other damages suffered by UNFI and its shareholders.