Item 1.01
Entry into a Material Definitive Agreement.
On April 10, 2017, SUPERVALU INC. (“
Supervalu
”), a newly formed wholly owned subsidiary of Supervalu (“
Merger Sub
”), and Unified Grocers, Inc. (“
Unified Grocers
”), entered into an Agreement and Plan of Merger (the “
Merger Agreement
”) pursuant to which Supervalu will acquire Unified Grocers in a transaction valued at approximately $375 million, comprised of approximately $114 million in cash for 100% of the outstanding stock of Unified Grocers plus the assumption and payoff of Unified Grocers net debt at closing (approximately $261 million as of April 1, 2017).
On the terms and subject to the conditions set forth in the Merger Agreement, at the closing of the transactions contemplated thereby (the “
Closing
”), Merger Sub will merge with and into Unified Grocers (the “
Merger
”) with Unified Grocers surviving the Merger as a wholly owned subsidiary of Supervalu, and the shares of Unified Grocers will be converted into the right to receive from Supervalu at the Closing approximately $114 million in cash in the aggregate.
As further provided in the Merger Agreement, the consummation of the transactions contemplated by the Merger Agreement is subject to certain closing conditions, including (i) approval of the Merger by the shareholders of Unified Grocers, (ii) any applicable waiting periods (or extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having expired or been terminated, (iii) the absence of any order by any governmental entity that restrains, enjoins or otherwise prohibits the Merger, (iv) the accuracy of the representations and warranties of the parties (generally subject to a material adverse effect standard), (v) material compliance by the parties with their respective obligations under the Merger Agreement, (vi) no material adverse effect having occurred with respect to the Unified Grocers business after entry into the Merger Agreement, and (vii) other customary closing conditions. The transaction is currently expected to be completed in mid- to late summer 2017.
Under the terms of the Merger Agreement, Supervalu will be entitled to receive a termination fee of $8,000,000, plus reimbursement of up to $1,000,000 in costs and expenses, in the event that the Merger Agreement is terminated by Unified Grocers under certain circumstances, including as a result of a change in the recommendation of the board of directors of Unified Grocers. In addition, a reverse termination fee of $9,500,000 may be payable by Supervalu to Unified Grocers upon termination of the Merger Agreement under certain circumstances, including if Supervalu is unable to obtain antitrust approval before January 5, 2018.
The Merger Agreement contains customary representations and warranties that are the product of negotiations among the parties thereto and that the parties made to, and solely for the benefit of, each other as of specified dates. The assertions embodied in those representations and warranties are subject to qualifications and limitations agreed to by the respective parties and are also qualified in important part by confidential disclosure schedules delivered in connection with the Merger Agreement. The representations and warranties may have been made for the purpose of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Supervalu, Unified Grocers, any of their respective subsidiaries or affiliates or the Unified Grocers business. The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about Supervalu, Unified Grocers, any of their respective subsidiaries or affiliates or the Unified Grocers business.
Supervalu expects to obtain “representation and warranty” insurance from certain insurers, which will provide coverage for certain breaches and warranties of Unified Grocers contained in the Merger Agreement, subject to deductibles, exclusions, policy limits, and certain other terms and conditions.
In connection with entry into the Merger Agreement, Supervalu entered into voting agreements with each shareholder of Unified Grocers that has a representative on the board of directors of Unified Grocers. The voting agreements require such shareholders to vote shares over which they have voting control in favor of the approval of the Merger and the Merger Agreement.
There is no material relationship between Supervalu and Unified Grocers other than in respect of the Merger Agreement.
The foregoing description of the Merger Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed herewith as Exhibit 2.1 and is incorporated herein by reference.