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SUPERVALU Inc. Message Board

  • reitdude42 reitdude42 Jan 11, 2013 1:55 PM Flag

    The New SuperValu - what we know so far...

    The Fitch analysis that someone keeps reposting on the board tells shareholders what we already know...SVU's purchase of Albertson's in 2006 was a horrible, value-eroding transaction.

    Nothing new here, people...let's move on...

    Here's what we know of the new SVU:

    1) According to Citigroup, the sale of the 5 banners to Cerberus allows SVU to "get rid of some of its weakest chains, such as Albertson's, Shaw's and Star Market."

    So of the 5 chains sold, 3 were the worst of the lot. The other two, Jewel and Acme, are also traditional grocers facing stiff competition from non-traditional players such as Wal-Mart and Whole Foods.

    For Cerberus and its partners, these purchases will largely be real estate plays.

    2) The transaction with Cerberus removes $3.2B in debt and capital leases and $1.2B in pension obligations and other LT liabilities from SVU's balance sheet.

    Old SVU liabilities = $8.6B

    New SVU liabilities = $4.2B

    Reduction in liabilities = $4.4B

    3) Most importantly - with respect to valuation - SVU has diversified its revenue stream AWAY from the traditional grocer store business which is most susceptible to competition.

    The old SVU:

    Traditional grocers = 63% of revenues
    Save-A-Lot = 12% of revenues
    Food distribution = 25% of revenues

    New SVU:

    Traditional grocers = 28% of revenues
    Save-A-Lot = 25% of revenues
    Food distribution = 47% of revenues

    Having the bulk of your revenues from food distribution and discount grocery (that can compete more effectively in this low-cost operating environment) is the greatest benefit of this transaction that will warrant an expansion to the their cash flow multiple!

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