SuperValu Inc. shares rose 65% on Thursday after United Natural Foods Inc. agreed to take over the grocer and grocery chain in a $ 2.9 billion deal, including debt.
United Natural Foods
specializing in healthier food choices, sells more than 110,000 products to more than 43,000 customer sites, including natural products stores and conventional supermarkets. The company pays $ 32.50 per SuperValu share
SVU, + 64.22%
equals a premium of 67% over the closing price of the stock on Wednesday.
The deal will expand its offering and help the company reach a broader customer base, said Steve Spinner, Chief Executive of UNFI, in a statement. Spinner is to lead the merged company, and Sean Griffin, the company's chief operating officer, will be the head of SuperValu integration efforts. UNFI said it will leave SuperValu's retail business, which includes 3,000 stores. The company has spent more than two years implementing a transformation plan aimed at returning to its wholesale roots.
UNFI expects the business to generate run-rate cost synergies of more than $ 175 million in the fourth straight quarter after completion. After the first year, it is expected to increase adjusted earnings per share and thereafter contribute to double-digit adjusted EPS growth.
"This combination provides Unified with significant scope that enables us to serve the country's most innovative and fastest-growing retailers and e-tailers," said Spinner Analysts in a conference call, according to a FactSet transcript. "Our industry continues to develop scale, efficiency, merchandising, services, and product choice, and is what our customers need and want, and that combination is what our dealers demand."
Moody & # 39; s said the deal was strategically meaningful As competition in the food retailing industry gets stronger and stronger. Amazon.com Inc.
Acquisition of Whole Foods has created a deep-seated giant in the food category that is putting the competition under pressure.
The UNFI SuperValu deal "gives us more confidence that wholesale food distribution now more than ever has to counteract price and competitive pressure across the food retail business," said Moody's Vice President Mickey Chadha in Commentary  Read now: Amazon profit: Prime Day is not the only thing that gives buoyancy to the economy
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"With extremely low margins on SuperValu and organic growth opportunities that are hard to come by because of the challenging business environment for its wholesale distribution customers, which are mainly independent food retailers or small retail chains, they are the most in the current advertising environment It therefore makes sense to partner with UNFI, which generates more than 35% of its turnover from grocery stores specializing in faster-growing natural and organic foods such as whole foods, "he said.
SuperValu was pressured by activist Blackwells Capital LLC to increase its financial performance. On Tuesday, Blackwells issued a presentation calling on shareholders to vote for their six board candidates to ensure change and unlock value.
United Natural Foods shares fell 13% in news and have now fallen 28% for 2018, while the S & P 500 Index