Supervalu Inc. (NYSE:SVU) has moved to inform the U.S. Securities and Exchange Commission of its plans to separate its grocery unit Save-A-Lot. Though the company appears to be currently focused on spinning off the unit, it could end up selling it to the highest bidder.
But the company also pointed out in a press release that there is no guarantee that separation of Save-A-Lot will be completed as it might decide to maintain its current corporate structure.
Amending registration statement
The SEC filing amends its registration statement. That should pave the way for the company to separate Save-A-Lot into a standalone, publicly-traded company through a spinoff transaction. Amending the registration statement also paves the way for Supervalu to pursue an outright sale of the grocery business to the willing buyer who meets its requirements for the unit.
The idea of separating Save-A-Lot is to enhance the value for its shareholders. The company has been leaning on separating Save-A-Lot for a while and the filing leaves no doubt about its commitment to reform its corporate structure by dropping down the unit.
What happens in a spinoff?
If Supervalu decides to spin off Save-A-Lot, it would keep 40% of the business and distribute 60% of it to its shareholders. Then within two years, Supervalu plans to have further narrowed its stake in Save-A-Lot by almost half.
Supervalu didn’t provide details about how the 60% of Save-A-Lot would be distributed to its shareholders.
Outright sale of Save-A-Lot
A number of buyout firms are showing interest in acquiring Save-A-Lot. If the business seems to be in hot demand, some analysts say that an outright sale would be more likely than a spinoff transaction because of the possibility of a premium buyout price.
Supervalu is planning to separate Save-A-Lot at a time when it is facing growing competition in the grocery space with the likes of Wal-Mart Stores, Inc. (NYSE:WMT) doubling their efforts.
What transpired in 1Q2017?
Supervalu generated revenue of $5.2 billion in its F1Q2017, which decreased nearly 4% from the year-ago quarter. EPS of $0.17 declined more than 26% YoY.