United Natural Foods Inc., the firm that bought Eden Prairie-based Supervalu Inc. last year, has sued Goldman Sachs and other banks that advised it on the $2.9 billion deal, saying they added tens of millions in costs and helped their other clients at its expense.
The suit, filed in New York State Court on Tuesday, said Goldman Sachs committed breach of contract and fraud and that the firm improperly extracted around $200 million for advisory and financing services.
The suit also names Bank of America Merrill Lynch as a co-defendant. The company filed a separate suit against Minneapolis-based U.S. Bank "for its collusive action, led by Goldman Sachs, in these matters."
"We expected our extremely well-paid transaction advisers to provide ethical counsel and unbiased support around this landmark acquisition — not leverage their positions to pursue larger profits for themselves and other clients at our expense and ongoing damage," Steven Spinner, chief executive of United Natural Foods, said in a statement issued Wednesday.
Goldman Sachs spokeswoman Nicole Sharp told Reuters that the bank believes the claims have no merit and plans to "vigorously defend ourselves against these accusations." Reached by Reuters, Bank of America spokesman Bill Halldin declined to comment. Reached by the Star Tribune, U.S. Bank declined to comment.
United Natural Foods hired Goldman Sachs to negotiate the deal and structure a loan to finance it. But by acting as both a trusted adviser and counterparty lender, Goldman Sachs "consolidated its command over all aspects of the transaction in order to extract millions in unjustifiable interest, fees, and other damages suffered by the company and its shareholders," United Natural Foods said.
The deal, the largest involving a Minnesota company in 2018, came after Supervalu had struggled for more than a decade to pay down debt it took on in 2006 to purchase the Albertsons grocery store chain, then one of the nation's largest. Its ongoing debt represented $1.6 billion of the $2.9 billion value of its sale to United Natural Foods.
In the lawsuit, United Natural Foods reveals that the deal originally called for it to retire that debt, the Wall Street Journal reported. But that would have been harmful to investors who had purchased credit default swaps (CDS) tied to the Supervalu debt, including hedge-fund clients of Goldman Sachs who owned such swaps. The investment bank was simultaneously trying to attract some of those hedge funds to participate in the loan, the company revealed in the suit.
