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Activist investor at Supervalu goes another step, urging breakup

John Ewoldt, Star Tribune (Minneapolis) on

Published in Business News

MINNEAPOLIS -- The activist investor at Supervalu is recommending even more radical changes than it previously did, saying now that the company should be broken up.

Blackwells Capital LLC in New York, which owns 4.35 percent of Supervalu's stock, sent a letter to the Supervalu board Tuesday recommending a separation of the company's wholesale and retail divisions. The wholesale business, which provides about three-fourths of revenue and nearly all its operating profit, should be shopped to potential buyers, such as SpartanNashCo, United Natural Foods or C&S, Blackwells said.

Supervalu responded in a statement that a "rapid transformation" is already underway. It has added significant customers in its wholesale business, including Fresh Market, as well as acquiring Unified Grocers and Associated Grocers. It also added new leadership in its wholesale and retail divisions.

Supervalu also sold its biggest retail operation, the Save-A-Lot chain that operated in the central U.S., in 2016 in part to put more emphasis on the wholesale business. The $1.3 billion sale significantly reduced debt and improved the balance sheet.

The Eden Prairie-based company also said it "continues to pursue options for certain retail banners and its real estate portfolio, while remaining focused on reducing costs." The company's grocery chains include Cub Foods, the market share leader in the Twin Cities; Farm Fresh; Hornbacher's; Shop 'n Save and Shoppers.

In October, Blackwells urged Supervalu to sell one-third of its grocery stores, parts of its real estate and bring new leadership. Blackwells wants to nominate three directors of its own to effect the changes and try to get shareholder support. It criticized most of the existing nine directors as having no direct retail operational experience with the last three board chairs having no wholesale or retail food industry experience.

Commenting on the Supervalu board's "passivity" and the company's "underperformance," Blackwells said in a statement, that it "left us with no alternative but to run an election contest and give shareholders an opportunity to vote for enhanced board leadership and support a mandate to explore all alternatives to unlock value."

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In response, Supervalu called Blackwells' proxy contest "unnecessary and counterproductive" in its statement.

Shares of Supervalu have been sliding for several years. The stock was down more than 30 percent year to date before news of Blackwells' latest letter. At Wednesday's market close, Supervalu shares were up about 5 percent.

Supervalu is one of the country's largest grocery wholesalers with annual sales of about $16 billion. It serves a network of more than 3,300 stores, including 213 retail stores, with 31,000 employees.

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