Supervalu Inc. at last succumbed to the 2008 recession.
The Eden Prairie company — which agreed on Thursday to be sold to another food wholesaler, United Natural Foods Inc., in a $2.9 billion deal — spent a decade trying to overcome the downturn's effect on a huge bet it made.
In early 2006, a bit more than two years before recession hit, Supervalu spent $12 billion to buy more than 1,100 stores of Albertsons Inc., at the time the nation's second-largest chain of grocery stores. When the economy collapsed, Supervalu still had more than $6 billion in debt and little room to maneuver financially as customers flocked to discounters.
"If we didn't go through 2008-09, it's probably not that big a deal," said Rob Plaza, an analyst at Key Private Bank in Cleveland, who wrote critically of the deal when it was forming in 2005. "The recession, how deep it was, hurt everybody. People were pushed further to the discounters and away from traditional grocery stores. When you [borrow] to buy it, it puts pressure on the margins. It's a vicious cycle."
Over the last decade, Supervalu's stock lost more than 90 percent of its value as it eventually sold the Albertsons assets as well as some of the grocery chains it owned before that deal. Few other food-related companies have fared as poorly over a decade, while the overall stock market has more than tripled in value.
This past year, Supervalu's difficulties led a New York investment firm, Blackwells LLC, to mount a proxy challenge. Shareholders are scheduled to vote on Aug. 16 whether to replace the company's board of directors with six candidates proposed by Blackwells.
That battle may be squelched by the company's sale to United Natural Foods. Blackwells declined to comment Thursday. Other bids may also emerge for the firm, though Supervalu and United Natural Foods said they aim to close the deal later this year.
In a sign of how the 2006 Albertsons deal still looms over Supervalu, $1.6 billion of its $2.9 billion sale to United Natural Foods is the value of Supervalu debt that United Natural Foods agreed to assume and eventually pay off.