The acquisition of Commerce-based Unified Grocers Inc. came a step closer to fruition as the Federal Trade Commission cleared the way in mid-May for Supervalu Inc. to purchase the wholesale food distributor for $375 million.
Under the deal announced in April, the Eden Prairie, Minn.-based grocery retailer and supplier would pay $114 million in cash for outstanding shares of Unified Grocers and would assume $261 million in debt.
Unified Grocers is a 95-year-old L.A. cooperative whose 370 member companies are both its customers and owners. The private company has 2,500 employees.
It sells dry grocery goods, frozen foods, meat, eggs, and bakery products, catering to grocers up and down the West Coast. The cooperative distributes products to more than 1,400 member and 1,600 nonmember stores in the region, such as Northgate Gonzalez Markets.
Unified Grocers’ operating income shot up 395 percent to nearly $9 million last year from $1.8 million in 2015. At the same time, revenue declined 7 percent to about $3.8 billion in fiscal year 2016 from $4 billion the year before, according to the cooperative’s annual report.
“Part of the reason income jumped was improvements in transportation and warehouse logistics,” said Paul Dingsdale, spokesman for Unified Grocers.
The company in its annual report attributed the revenue decline to the Chapter 11 bankruptcy protection filing of one its clients, Bellingham, Wash.-based grocery chain Haggen Inc. Haggen filed for bankruptcy protection six months after it entered the Southwest market with the ill-fated purchase of Supervalu’s Albertson’s properties. Unified Grocers was a creditor of Haggen, according to court documents.
“While sales declined primarily due to the loss of business from Haggen’s Pacific Southwest stores and meat deflation, gross profit as a percentage of sales showed an improvement on 2015,” Unified Grocer Vice President Christine Neal stated in the report.
Unified Grocers’ largest customer is Cash & Carry, a Portland, Ore.-based chain of discount warehouse groceries. The company made up 17 percent of the cooperative’s net sales in the recent fiscal year.
Supervalu distributes products to 2,363 stores and has annual sales of about $12 billion, the company said.
The company has been lowering its retail footprint and paying down debt over the last few years. The company sold five supermarket chains, Albertsons among them, in a $3.3 billion deal in 2013.
It sold another chain, Save-A-Lot, to Canadian private equity firm Onex Corp. for $1.37 billion in December. While the company’s distribution efforts mainly operate in the Midwest and parts of the East and Southeast, the acquisition of Unified Grocers marks a foray into the Pacific Northwest.
The transaction awaits approval by Unified Grocers’ shareholders, who are scheduled to vote on the deal June 22.
“If approved, Unified Grocers will become a wholly owned subsidiary of Supervalu,” Dingsdale said. “It will no longer be a cooperative and will operate under the business structure of Supervalu.”
