Cerberus Said to Seek Tie-Up of Albertsons With Supervalu

Cerberus Capital Management LP is in talks to buy all of Supervalu Inc. (SVU) to merge the grocery chain’s operations with its Albertsons stores, said three people with knowledge of the matter.

The food retailer has given Cerberus extra time until mid- November to conduct due diligence, said the people, who asked not to be named because the talks are private.

Cerberus, which specializes in distressed investing, bought a stake in Albertson’s Inc. in 2006 with a group that included Supervalu. At the time, Cerberus got 655 grocery stores and Eden Prairie, Minnesota-based Supervalu took over more than 1,100, under brands including Albertsons, Bristol Farms and Star Market. Today, the food retailer operates more than 450 sites under the Albertsons banner, whose origins date back to 1939.

Supervalu shares fell 2.5 percent to $3.18 yesterday in New York.

“We’ve had interest and we are in discussions,” Jeff Swanson, a spokesman for Supervalu, said in an interview. He declined to elaborate. Peter Duda, a spokesman at Cerberus, didn’t respond to requests for comment.

Supervalu’s market value has shrunk as the grocer lost more than $2.5 billion over the past two fiscal years, hurt by increasing competition from discounters and costs to run stores. The retailer reported its 14th straight quarterly sales drop last month, citing promotional pricing and more budget-conscious shoppers.

Financial Performance

At the time, the third-largest U.S. grocery chain posted a net loss of $111 million, or 52 cents a share, for the three months ended Sept. 8, compared with net income of $60 million, or 28 cents, a year earlier. Sales fell to $8.04 billion in the quarter.

In July, Supervalu said it was working with Goldman Sachs Group Inc. (GS) and Greenhill & Co. to review options. The company attracted interest in parts of its business from private-equity firms KKR & Co. and TPG Capital, as well as from billionaire Ronald Burkle, people with knowledge of the matter said last month.

To contact the reporters on this story: David Welch in New York at dwelch12@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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