Supervalu sets Aug. 16 for shareholder meeting and showdown with activist investment firm

The activist investor pursuing control of Supervalu Inc. sought to take over its grocery-store chains, including Cub Foods, for nothing, the company told shareholders Monday.

Supervalu executives rejected the proposal, which was made at a meeting in January, saying that they would only sell the grocery operations to companies with a background in the business. The exchange revealed a new motive behind the increasingly tense battle between the Eden Prairie-based company and the activist, Blackwells Capital LLC, a New York investment firm.

That battle will climax on Aug. 16, the date of the company's annual meeting. In a regulatory filing announcing the date Monday, Supervalu urged shareholders to support its nominees to the company's board of directors and reject Blackwells' competing slate.

Supervalu is also seeking shareholder support for restructuring itself into a holding company, a move that may ease some logistics as it seeks to sell more of its retail operations in the future. The company since 2016 has been focused on beefing up its wholesale business, which distributes groceries in most regions of the U.S., while scaling back in retail. After the sale of its Save-A-Lot chain for more than $1 billion a year ago, Cub Foods is now the largest of the retail chains still in its portfolio.

Blackwells has expressed support for the restructuring, but it is seeking more aggressive actions to exit the retail business. After it began acquiring sizable amounts of Supervalu shares about a year ago, its executives have repeatedly urged the sale of retail operations or, at least, the real estate associated with them.

"With real estate valuations at all-time highs, the company in our view could have monetized this real estate through attractive sale-leaseback transactions, but only began such efforts belatedly after we publicly prodded Supervalu to do so," Blackwells said in its own regulatory filing and campaign materials sent to Supervalu shareholders.

The company is the third-largest stakeholder in Supervalu with a 7.7 percent stake after institutional investors BlackRock Inc. and Vanguard Group, according to the documents from both sides. It owns about a 5 percent stake in directly held shares, with the rest in options that reduce Blackwells' risk in case the value of Supervalu shares fall.

Blackwells did not mention its proposal to take outright ownership of Supervalu's retail operations in the materials in a regulatory filing made last Friday seeking shareholder support for its directors. In a description of the Jan. 17 meeting when its principal Jason Aintabi pitched the idea, Blackwells said it made a presentation to Supervalu on "the history of consolidation" in the grocery business and why it is inevitable.

Supervalu's description of the meeting said that its retail businesses "would need to be sufficiently capitalized and purchased and led by someone with at least some grocery or retail experience given our retail business would be a significant customer of our wholesale business." Aintabi suggested he could do the job despite his lack of grocery-industry experience, the Supervalu description said. "We stated that we remained laser focused on creating value for our stockholders," the company wrote in further describing the meeting.

Since Blackwells revealed publicly earlier this year that it intended to run a competing slate of directors, the two sides have privately held settlement talks that would involve Supervalu agreeing to support some board candidates that the activist firm proposed. But they could not agree on a number, with Blackwells proposing as many as six and Supervalu only two.

As a result of the inability to settle, shareholders will decide between nine candidates offered by Supervalu, including its current Chairman Don Chappel and Chief Executive Mark Gross, and six candidates proposed by Blackwells.

Evan Ramstad • 612-673-4241