Unified Grocers truck, SuperValu
Unified Grocers is a retailer-owned wholesale grocery cooperative that supplies independent supermarkets in the Western United States.

MINNEAPOLIS — Supervalu Inc. has agreed to acquire Commerce, Calif.-based Unified Grocers Inc. in a transaction valued at approximately $375 million.

The transaction is expected to be accretive to earnings per share, excluding transition and integration costs as well as potential purchase accounting adjustments, in the first full fiscal year following closing which begins on Feb. 25, 2018. The wholesale grocery companies expect to close the transaction during the summer.

Mark Gross, SuperValu
Mark Gross, president and c.e.o. of Supervalu

“We’re thrilled at the opportunity to bring together these two great organizations,” said Mark Gross, president and chief executive officer of Supervalu. “By acquiring the Unified business, including gaining a wealth of expertise and talent, we will become a stronger and more efficient organization. The transaction will enhance our ability to help our customers better compete in the evolving grocery industry.”

Financing for the transaction includes approximately $114 million in cash for 100% of the outstanding shares of Unified Grocers. Supervalu also agreed to pay off Unified Grocers’ outstanding net debt, which was about $261 million as of April 1. Shareholders of Unified stock must approve the merger, in addition to other customary closing conditions. Unified Grocers will be a wholly owned subsidiary of Supervalu once the merger is complete.

The combined companies will operate 24 distribution centers that supply customers in 46 states and serve a customer base of more than 3,000 stores. The merger is expected to open new avenues for growth such as the expansion of Unified Grocers’ Market Centre division which provides specialty and ethnic products to independent retailers.

Unified Grocers distribution center
The combined companies will operate 24 distribution centers that supply customers in 46 states.

In an April 11 conference call with analysts, Mr. Gross identified several compelling reasons for the acquisition.

“First, there’s a great cultural fit between these companies,” he said. “Both Supervalu and Unified emphasize a commitment to exceptional customer service, allowing our retailer customers to offer shopping experiences with a focus on meeting the shopper where they are in their community. The Unified leaders and employees bring a great deal of talent and experience to the combined organization, and we're excited to welcome the Unified organization and retailer base to Supervalu.

“Second, Unified serves a large, diverse customer base with stores that serve an important need in their local communities. Unified’s retailers operate some of the industry’s most exciting and responsive Hispanic and ethnic — and other ethnic formats in addition to specialty, gourmet, price impact and traditional stores. Many of the products that help differentiate and make these stores successful come through Unified’s specialty and ethnic distribution business called Market Centre. Market Centre is a dedicated operation that supplies some of the fastest-growing categories in the industry and is a business that Supervalu can expand across the country and take to our customer base. Clearly, the knowledge and experience Unified has developed in serving these formats can and will make us a better wholesaler.

SuperValu distribution center
Supervalu is one of the largest grocery wholesalers and retailers in the United States.

“Third, the increased scale of the combined company provides an opportunity to achieve critical operational synergies. In the ever-changing grocery environment, competition continues to come from all angles, including self-distributing chains and club stores. And we believe bringing together these two companies will make us a stronger and more efficient wholesaler that can help these stores successfully compete in today’s environment. This is most apparent in the Pacific Northwest, where collectively we operate three distribution centers, all with substantial excess capacity. The larger combined customer footprint will allow us to explore different alternatives for the D.C. network in an effort to lower our overall operating costs and enhance our customers' competitiveness. 

“Fourth, we have a broad and integrated service platform that we believe is second to none amongst our wholesale peers. By providing this extensive menu of professional services offerings to Unified’s customers, we can add value to their operation, help them run their businesses more efficiently, assist them in responding more quickly to current trends and allow them to better focus their operations on customer-facing initiatives. Again, this will help them be more competitive.”

The combined business is expected to achieve at least $60 million in cost synergies at the end of the third year after the transaction closes, primarily through consolidation of some back office functions, Supervalu said. The company also expects to incur transition and integration costs of up to $60 million within the first two years after the merger is complete.

Robert Ling, Unified Grocers
Robert M. Ling, president and c.e.o. of Unified Grocers

“We believe this transaction will benefit the members and customers of Unified Grocers as they look for new and innovative ways to serve the communities in which they operate,” said Robert M. Ling, president and c.e.o. of Unified Grocers. “Supervalu and Unified share a common vision of providing best-in-class services and products to the independent grocer. The cultural fit between Supervalu and Unified well positions the combined company to pursue a shared dedication and commitment to growth and innovation, providing increased value to customers.”

Supervalu is one of the largest grocery wholesalers and retailers in the United States with annual sales of approximately $13 billion. Unified Grocers, a retailer-owned wholesale grocery distributor that supplies independent retailers throughout the western U.S., reported annual sales of about $3.8 billion. Supervalu will maintain Unified Grocers’ headquarters in Commerce along with management and employees.