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SUPERVALU Inc. Message Board

  • investingodaat investingodaat Jan 10, 2013 4:01 PM Flag

    Riddle me this....

    Please help me clarify my thoughts...
    Cerberus buys 877 stores for $100M plus the assumption of $3.2B in debt. Total purchase price $3.3B. SVU is left with another 1950 stores and distrubution with approx. revenue of $17B. Cerberus will invest another approx. $250M to buy up to 30% of the REMAINING company and put in place new management to turn it around. The remaining company that now has $17B in revenue. I think Cerberus believes they can drop 1% to the bottom line.(over the next 2-3 years) This is $170M each year or .80/share(assuming no dilution) Safeway and Kroger currently have 8-18 PE ratios. That would give Cerberus a share price of at least $6.40/share. More than likely they will have a higher multiple because Wall Street will be enamored with the turn around story. This gives them at least a 60% return over 2-3 year period.

    I believe that the current deal values SVU at a minimum of $4.50/share. I think that Cerberus believes it is even higher. They wouldn't pay $4/share if they believed it was fully valued. I understand that they believe they can extract more value by running the company better than current mgmt. The underlying assumption in any investment is that the current price I am paying is less than what I belive it will be in the future. I think the $250 million at $4/share says much more about the future price of SVU. I think the current price is based on shorts buying and dumping and other taking short-term gains.

    What do you the rest of you think?

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    • Or Cerberus buys 877 stores for $100M plus the assumption of $3.2B in debt. Total purchase price $3.3B. SVU is left with another 1950 stores and distrubution.SVU will not sell unless included in the deal is Cerberus must invest another approx. $250M to buy up to 30% of the remaining company.Maybe SVU started at 50% and had to reduce to 30% to make the deal. How long does Cerberus have to own the shares before they can sell?

      Sentiment: Hold

    • Perhaps I am fortunate...some would say that investing in SVU was like trying to catch a falling knife..I had taken a ;ittle profit but that was just to leverage myself...I will hold on to a small amount... I'm near even... but in looking to the Cerberus future, I'm hopefull for their successful future..

    • I am not sure what to do. I own a decent amount of shares on supervalu in my own portfolio. What do you think. Should you sell? Regarding Supervalu. I have seen the stock double in value in the last two weeks and have read articles the stock was at one time over Ten dollars.

      Sentiment: Hold

    • If you look at chart, before the cliff $4 was around the lowest price SVU ever been in its history .I agree with you that Cerberus looking for value higher than that. May be people need to ask themselves: If Cerberus is willing to pay $4 for this stock, do I want to give it up for $4?

    • the 250 Million goes to existing shareholders, does nothing for the new SVU

      ++++++++++++++++++

      obviously, Cerberus wants the new SVU to be successful, because they have 250 Million riding on it

      +++++++++++++++++

      "nobody", including Cerberus, knows with certainty, how successful the new SVU is going to be, or where the stock price might be headed

      +++++++++++++++

      large institutions will study the "new SVU" structure and financials--and will place buy or sell bets, based on their analysis--but so far, they ain't making any big effort to buy shares--otherwise, the price would be headed much higher

      • 1 Reply to cccbondguy
      • I agree that Cerberus is buying from existing shareholders but that is because they think $4/share is a good price. Terms include that if they cant get $4/share, SVU has to issue new shares. They want to dump $250M into the remaining entity. Of course Cerberus understands the risk and that it may not go exactly as planned but they are willing to shove $250M out there. They obviously believe they can get more than $4/share or they wouldnt do the deal. They know that it takes certain earnings per share and a certain PE ratio.

        Dont think for a second the large institutions know how to value a deal. Most analysts have never run a company and prefer to remain arm chair quartebacks.

 
SVU
7.36-0.03(-0.41%)Jul 27 4:00 PMEDT