Supervalu to buy California-based cooperative Unified Grocers for $375 million

It's buying a California-based cooperative for $375 million.

April 11, 2017 at 2:38AM
Supervalu made a $375 million deal to greatly expand its wholesale business, which includes its center in Hopkins. (DAVID JOLES/Star Tribune file photo)
Supervalu made a $375 million deal to greatly expand its wholesale business, which includes its center in Hopkins. (DAVID JOLES/Star Tribune file photo) (The Minnesota Star Tribune)

Supervalu Inc. has agreed to buy Unified Grocers, a Los Angeles-area food distributor, in a $375 million deal that intensifies its focus on the wholesale business.

Supervalu said Monday it will pay $114 million in cash for all outstanding shares of Unified, a cooperative owned by member grocery firms, and assume about $261 million in debt. The deal is expected to close this summer.

Unified's $3.8 billion in annual revenue adds to Supervalu's existing wholesale business, which had about $8 billion in revenue last year. The Eden Prairie-based company also has a $4.8 billion retail division, which includes the Cub Foods chain — the largest grocer in the Twin Cities.

Combined, Supervalu and Unified will operate 24 distribution centers that will serve 3,000 groceries in 46 states.

Supervalu began to shift its focus away from retailing in 2013 when it sold Albertsons, which it had acquired in 2006, and four other chains. In December, Supervalu completed the sale of its national discount supermarket chain, Save-A-Lot.

The purchase of Unified represents a push into the West Coast for Supervalu's distribution business, which chiefly operates in the Midwest and parts of the East and Southeast. It operates a single distribution center on the West Coast in Tacoma, Wash.

Unified is a combination of three West Coast wholesale grocery cooperatives, each founded more than 80 years ago.

Two of the cooperatives, one based in Los Angeles and another in Portland, Ore., merged in 1999 to form Unified Western Grocers.

Eight years later, the merged cooperative bought Seattle-based Associated Grocers and dropped the "Western" from its name.

The company sells dry grocery goods, frozen foods, meat, eggs and bakery products to its member retailers, as well as supermarkets that are not members.

It has two dairy divisions, one each for the Pacific Northwest and Southern California.

Unified's largest customer is Cash & Carry, a Portland, Ore.-based chain of discount warehouse groceries spread over five western states. Cash & Carry comprised 17 percent of Unified Grocers' net sales in its most recent fiscal year.

"We're thrilled at the opportunity to bring together these two great organizations," Mark Gross, Supervalu's chief executive, said in a statement. "By acquiring the Unified business, including gaining a wealth of expertise and talent, we will become a stronger and more efficient organization."

Supervalu said it will aim to expand Unified's Market Centre division, a unit that provides specialty, ethnic and wellness products.

The company said it would keep an "important and visible presence" in Unified's headquarters city of Commerce, Calif.

Bob Ling, chief executive of Unified Grocers, said the deal would benefit the co-op's member grocers "as they look for new and innovative ways to serve the communities in which they operate."

Supervalu said it expects to spend $60 million on transition and integration costs in the first two years after the deal closes.

Within three years, it expects to save $60 million in the annual cost of running the combined operations.

Evan Ramstad • 612-673-4241

Mike Hughlett • 612-673-7003

about the writers

about the writers

Evan Ramstad

Columnist

Evan Ramstad is a Star Tribune business columnist.

See More

Mike Hughlett

Reporter

Mike Hughlett covers energy and other topics for the Star Tribune, where he has worked since 2010. Before that he was a reporter at newspapers in Chicago, St. Paul, New Orleans and Duluth.

See More

More from Business

FILE - This April 8, 2020, file photo shows the Smithfield pork processing plant in Sioux Falls, S.D. A group representing pork producers urged the federal government Tuesday, May 25, 2021, to let them continue an effort to speed up the processing of pigs into bacon and ham despite a union's claim that the increased volume endangers workers. (AP Photo/Stephen Groves, File)

The plant is the latest in a litany of southern Minnesota towns, from Madelia to Marshall to Worthington, to face allegations they illegally employed minors in meat-processing facilities.