A consortium consisting of Supervalu Inc., CVS Corporation and an investment group led by Cerberus Capital Management, L.P., has agreed to acquire Albertsons, Inc., the food and drug stores group, for a total consideration of US$17.4bn, in cash, stock and assumed debt.

Under the terms of the deal, Supervalu itself will acquire around 1,124 stores and 100% of the support operations for Acme Markets, Bristol Farms, Jewel-Osco, Shaw’s, and Star Markets, as well as all Albertsons banner stores in Idaho, Southern Nevada, Utah, Southern California, and the Northwestern US and the combo-store pharmacies operating under the Osco and Sav-on fascias. This will give the expanded Supervalu operation annual sales of around US$44bn, making it the second largest supermarket company in America.

CVS will acquire 100% of the stand-alone drugstore business including around 700 freestanding stores as well as a distribution facility at La Habra, California, along with the Albertsons’ ownership interests in the drug store real estate. All of the stand-alone drugstores included in this part of the deal will be converted to the CVS format.

The Cerberus-led investment group, which includes Kimco Realty Corporation, Schottenstein Stores Corp., Lubert-Adler Partners and Klaff Realty, LP., is to take over 655 stores and all the distribution centres and offices in Albertsons’ Dallas/Fort Worth division, and in the Florida, Northern California, Rocky Mountain and Southwestern regions. These stores operate under the Albertsons and Super Saver banners and also include combo-store pharmacies under the Osco and Sav-on banners. Cerberus has also acquired 26 Cub Stores from Supervalu in the Chicago area for an undisclosed sum.

“This transaction brings our review of strategic alternatives to a very successful conclusion,” said Larry Johnston, chairman and CEO of Albertsons. “Over the past several years our team has executed a major restructuring of the company while simultaneously demonstrating strong financial performance compared to our primary traditional competitors in the areas of earnings, sales and free cash flow. This transaction will bring a substantial cash payment to our shareholders. In addition, it also enables our shareowners to benefit from continuing ownership interest in an exciting new retail food and drug company.”

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