Supervalu sale faces long odds

Supervalu Inc. has put itself publicly on the block but do not expect this company to get sold in 1 piece or in any of pieces for selling quickly, given the uncertainties that facing this embattled grocer. This was consensus of the stock analysts on Thursday, one day after Supervalu had said that it was reviewing the ways for boosting the value of shareholder, including selling of all or some parts of this company.

On Thursday, Supervalu was biggest loser on New York Stock Exchange. Their shares went down from $2.60, or about 49 percent, closing in at $2.69. announcement Supervalu’s of some possible sale came after this market had closed on Wednesday, with the news that company that is Eden Prairie-based suspended their dividend and had suffered terrible 1st quarter.

Michael Keara, one stock analyst @ Morningstar said that they are in plenty of trouble. This company is now in deepening down ward spiral as it now continues for losing their business to the competitors who are lower-priced. Owner of Twin Cities’ Cub Foods, called Supervalu is 1 of biggest national operators of super market having eleven separate chains. However, it is “highly unlikely” that buyer will snap up entire company, says Scott Mushkin, who is analyst @ Jefferies.

Keara had put odds of 1 shot acquistion @ “zero.” While there has been speculation some that outfit of private equity may make some run @ Supervalu, Keara had said that is very unlikely considering Supervalu already had saddled along with some debt. The private firms of equity typically do the leveraged buy outs, loading target company along with some debt. But along with Supervalu, “this isn’t happening,” says Keara. Any chance of industry competitor buying Supervalu is too is really unlikely, he says. Discounters of grocery just like Target and Wal-Mart are totally different in terms of business models.

Also, the Supervalu’s conventional rivals of grocery – for instance – Kroger are already getting market share @ Supervalu’s expense. You are taking the market share already so why should you commit any capital [for buy Supervalu]?” This maxim can apply for buying the individual chains of Supervalu, too, say the analysts, especially the laggards like Acme & Shaw’s @ New England & Philadelphia. Supervalu hasn’t given up yet & Wednesday had announced an accelerating program of price-cutting which is really important for their turnaround plans. If Supervalu succeeds, few competitors may take one harder look for buying the assets of Supervalu for avoid cost of extended war of price, Mushkin wrote in one research note.

On other hand, the potential buyers could just wait out for price war. The buyers do not have any incentive for paying the full price for asset of Supervalu “when there’s very strong possibility which they can buy cheaper if [Supervalu’s] turn around fails to turn up,” Jason DeRise, a UBS analyst, had wrote in one research note. Jonathan Feeney, who is analyst @ Janney Capital Markets, had wrote in one research note that “there is not much reason for believing deals which are now imminent.” However, he had noted that there can be “significant value in sale of strong [Supervalu] stand alone asset.”

Acme, Shaw’s, & Albertsons, latter being Supervalu’s large Western chain, all look like their struggling, wrote by Feeney. “This leaves Jewel, [Supervalu’s] the leading banner in biggest geography, as great unknown.” Jewel is commanding leader @ Chicago market of grocery, with share of above 30 percent. The sale or any other strategic action from Supervalu “can be quite complicated,” wrote analyst at JPMorgan called Ken Goldman. This company has complicated structure of organization. It has plenty of debt, & it isn’t clear about how this debt will get allocated in breakup. There is plenty of the “pension exposure,” wrote Goldman. Supervalu is a party for several plans of pension through the various chains.