(By Balachander) Supervalu Inc. (NYSE: SVU) has agreed to sell its five retail grocery banners to Cerberus-led investor group for $3.3 billion and the company named Sam Duncan as its CEO.
Shares jumped in early trading on Thursday following the announcement.
Supervalu, which posted weaker-than-expected quarterly earnings, said it will have "three strong, market-leading business units with more consistent cash flows and improved EBITDA growth potential" following the sale.
The company said a newly-formed acquisition entity will conduct a tender offer for up to 30 percent of its shares at $4.00 apiece, a premium of 32 percent to the stock's previous closing price.
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Under the agreement, Supervalu will sell its Albertsons, Acme, Jewel-Osco, Shaw's and Star Market stores and related Osco and Sav-on in-store pharmacies to AB Acquisition LLC. Following the sale, the company expects annual revenue in excess of $17 billion.
Duncan, the former CEO at OfficeMax Inc. (NYSE: OMX), is expected to assume his new role in late February, and he replaces Wayne Sales. The company appointed Bob Miller as non-executive chairman of the board.
Eden Prairie, Minnesota-based Supervalu expects the sale to close in the first calendar quarter of 2013.
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Separately, Supervalu posted earnings per share (EPS) of 8 cents for the third quarter versus a loss of $3.54 a share in the year-ago period that included asset impairment charges of $3.78 a share. Adjusted EPS fell to 3 cents from 24 cents, trailing market expectation of 5 cents.
Net sales fell nearly 5 percent to $7.9 billion due to store closures and 4.5 percent drop in identical store sales. Gross margin shrank to 21.2 percent from 21.7 percent.
The stock, which has been trading in the 52-week range of $1.68 to $7.73, traded 16.78 percent higher at $3.54 at 9.44 am ET on Thursday.