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Shares of Jewel parent Supervalu soar on talk of Cerberus bid

An employee returns shopping carts outside Jewel Osco store 3400 block N. Western Ave.  | Sun-Times file

An employee returns shopping carts outside a Jewel Osco store at the 3400 block of N. Western Ave. | Sun-Times file

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Updated: November 24, 2012 6:17AM



With new talk of a takeover bid circulating, investors concluded Monday that shares of grocery giant Supervalu Inc. indeed were a super value.

Shares of the company rose 44.75 percent during the day’s trading. The intense interest following new reports of a potential buyer for Supervalu, whose national network of stores include Jewel-Osco in the Chicago area.

Reuters said Cerberus Capital Management LP is preparing a bid for the company, citing three sources. Debtwire said Cerberus has talked to JPMorgan Chase & Co. and Bank of America Corp. about putting together $4 billion to $5 billion in financing for the deal.

Supervalu declined to comment beyond statements from last week. In reporting a $111 million quarterly loss Thursday, it said it was in “active dialogue with several parties” as it cautioned about the chance that no sale will occur.

The company is believed to favor a one-shot sale rather than dividing itself into parts.

Cerberus’ interest was first rumored last week, and several other bidders are reported to want at least parts of the company. Billionaire Ron Burkle’s Yucaipa Cos., buyout firm KKR & Co., TPG Capital and Grand Rapids, Mich.-based Spartan Stores Inc. also have been reported to be in the mix.

Supervalu has struggled to adapt to the low-price business models of competitors. It has cited progress in early results from a transformation of Jewel-Osco stores, a rebranding that could write the playbook for changes to other stores.

The stock rose 98 cents Monday to close at $3.17. The shares opened the year at about $8.

The huge rally may stem in part from pressure on short sellers, who bet that a stock will decline. Market data show about 41 percent of Supervalu shares are held by short sellers, one of the highest percentages of any stock in the Standard & Poor’s 1500.

Cerberus has a history of working with Supervalu. In 2006, it was part of the group Supervalu led in buying grocery chain Albertson’s Inc. for $17.4 billion in cash, stock and debt. The sale saddled Supervalu with loans but they carry low interest rates.

Some analysts have been impressed by the company’s ability to cover its debt costs and reinvest in its stores.



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