Highlights Significant Wholesale Growth and
Transformative Steps to Drive Value Creation
Urges Stockholders to Vote “FOR” All of
SUPERVALU’s Highly Qualified Directors on the WHITE Proxy
Card
Urges Stockholders to Vote “FOR” Holding
Company Proposal to Facilitate Strategic Transformation
Recommends Stockholders Refrain From Voting for
Blackwells’ Nominees
SUPERVALU INC. (NYSE:SVU) today announced that it will be
mailing a letter to its stockholders in connection with the
Company’s upcoming 2018 Annual Meeting of Stockholders to be held
on August 16, 2018. SUPERVALU stockholders of record at the close
of business on June 25, 2018 are eligible to vote at the Annual
Meeting.
The SUPERVALU Board of Directors unanimously recommends that
stockholders vote “FOR” ALL nine of SUPERVALU’s
highly qualified director candidates and “FOR” the Holding
Company Proposal on the WHITE proxy card.
The letter highlights the rapid execution of a strategic
transformation strategy that is demonstrating strong momentum and
already delivering measurable results:
July 9, 2018
Dear Fellow Stockholder:
Your Board of Directors and management team
are committed to enhancing the value of your investment in
SUPERVALU INC. and we continue to proactively develop and pursue
opportunities to achieve that goal. We have been taking decisive
actions to create stockholder value by rapidly and strategically
transforming SUPERVALU into the wholesale supplier of choice in the
U.S. grocery industry – and we continue to make meaningful
progress.
At SUPERVALU’s upcoming Annual Meeting of
Stockholders on August 16, 2018, you will be asked to make
important decisions regarding the composition of the Company’s
Board and the future structure of your Company, which we believe
will impact the value of your investment. Blackwells Capital, a New
York-based alternative investment firm, is trying to seize control
of your Board by proposing to replace six of nine directors.
Blackwells’ attempt to seize control of your Company, without
paying a premium to all stockholders, is highly disproportionate to
its actual ownership stake in SUPERVALU.
Any claim Blackwells could make to act on
behalf of SUPERVALU’s stockholders is belied by the fact that,
through short sales of call options and the purchase of put
options, Blackwells’ exposure to the Company is substantially less
than it represents. In fact, while Blackwells claims that it has a
7.7% ownership interest in SUPERVALU, analysis of the detailed
information it has provided in its filings shows that, taking into
account its various options contracts, Blackwells’ exposure to the
Company’s shares is materially lower than 7.7%.1
We believe that there is significant risk to
the important progress the Company is making in executing its
ongoing strategic plan by supporting Blackwells and its proposal to
replace the majority of your Board.
Your vote is very important. We
encourage you to protect the value of your investment in SUPERVALU
and vote “FOR” ALL of the Company’s director candidates
listed on the enclosed WHITE proxy card.
YOUR BOARD HAS BEEN TAKING AND
CONTINUES TO TAKE DECISIVE ACTION TO BEST POSITION SUPERVALU IN AN
EVOLVING GROCERY INDUSTRY
SUPERVALU has been in business for more than
140 years, with our roots in the wholesale grocery industry. Over
the years, our business evolved to include grocery retail and other
supply chain services. Just as the Company has always sought out
new ways to improve efficiency and better serve customers, we have
also remained committed to identifying and executing on the highest
potential market opportunities and taking actions that would drive
value for all stockholders.
Long before Blackwells first contacted
members of the SUPERVALU management team, and before Blackwells
purchased a single share of SUPERVALU, your Board had taken bold
steps to fundamentally shift the direction of the Company and
return SUPERVALU to its roots by becoming the wholesale supplier of
choice for grocery retailers across the U.S.
THE COMPANY IS MAKING SIGNIFICANT
PROGRESS IN EXECUTING ITS TRANSFORMATION INITIATIVES
Your Board laid the foundation for
SUPERVALU’s transformation by intentionally recruiting and hiring a
wholesale industry leader with a strong track record of delivering
growth, Mark Gross, to serve as President and Chief Executive
Officer in February 2016. Under Mr. Gross’ leadership, the Company
has taken major steps to position SUPERVALU as the grocery
wholesale supplier of choice, while also ensuring that certain of
the Company’s well-positioned retail assets are strategically used
to add value to the overall business. These steps began long
before Blackwells came on the scene and include:
- Completing the Sale of
Save-A-Lot. As an important early step in the strategic
transformation of the business, your Board and management team
pursued and completed the sale of the Company’s Save-A-Lot business
in December 2016. This sale enabled SUPERVALU to utilize the $1.3
billion in proceeds to significantly reduce the Company’s debt and
create flexibility to execute transformation initiatives and pursue
important strategic acquisitions and growth opportunities.
- Executing a Dramatic Turnaround of
the Wholesale Business. Building on an annual sales base of
approximately $8 billion, the Company added $5 billion in sales on
a run-rate basis to the Wholesale business in just two years – a
growth rate of over 60%. We were able to accomplish such
significant growth, and increase Wholesale to 80% of total company
sales from just 44% two years ago, through a combination of organic
business growth and by completing the acquisitions of Unified
Grocers (“Unified”) in June 2017 and Associated Grocers of Florida
(“AG Florida”) in December 2017. These two acquisitions
significantly expanded our customer base, geographic footprint,
product offerings and expertise. In fact, we are currently
executing the integration of Unified and AG Florida and have raised
our 3-year synergy estimates by $20 million so that we now expect
to achieve annual cost savings of at least $96 million.
- Unlocking the value of our owned
real-estate portfolio. We monetized a significant portion of
our owned real-estate portfolio through the sale and leaseback of
eight distribution centers, totaling nearly six million square feet
of space. This transaction will generate net proceeds of
approximately $445 million, which we are using to further reduce
outstanding debt. We continue to work with a nationally renowned
real estate advisory firm to assess the remaining approximately 13
million square feet of owned real-estate, while ensuring we
maintain strategic and operational flexibility.
- Reducing our retail footprint.
In March 2018, we completed the sale of a majority of our Farm
Fresh retail stores and pharmacy assets for a total of $53 million,
and sold our minority stake in a multi-store Cub Foods LLC that
generated proceeds of $14 million. In April 2018, we announced that
we are pursuing the sale of our corporately owned Shop ‘n Save and
Shop ‘n Save East retail operations in order to further optimize
our asset base and provide us flexibility to invest capital in
select, innovative store remodels and in-store merchandising
initiatives within certain of our stronger retail assets.
- Pursuing new initiatives.
Consistent with our focus on growing our Wholesale business, we
also pursued new initiatives designed to position us for success in
our rapidly evolving industry. For example, our recent entry into a
multi-year reseller agreement with Instacart creates a new
professional services offering and expands our digital capabilities
by allowing SUPERVALU to offer the benefits of online shopping and
delivery services to more than 3,000 independent retail stores
supplied by SUPERVALU, as well as other retailers across the U.S.
in the over 240 metro areas where Instacart operates.
These actions are translating into measurable
results. Adjusted EBITDA in our Wholesale segment grew
approximately 19% between fiscal 2016 and fiscal 2018.2 Further, as
a result of our prudent and targeted investments in stronger retail
assets, identical store sales for our three retail banners in
continuing operations have sequentially improved every quarter over
the past four reported quarters.
THE COMPANY’S PROGRESS ON ITS
TRANSFORMATION WILL BE FURTHER SUPPORTED THROUGH A PROPOSED HOLDING
COMPANY STRUCTURE
We have taken decisive actions at both the
Wholesale and Retail levels to enhance our competitive position
within the changing food industry, strengthen our balance sheet and
most importantly, to position the Company to deliver long-term
value to all stockholders.
Our Wholesale and Retail leadership teams
remain dedicated to managing the successful execution of our
go-forward, four strategic pillar strategy: grow our core Wholesale
business, optimize our asset base, de-lever our balance sheet and
pursue strategic and opportunistic mergers and
acquisitions.
To further support our strategic
transformation, we are proposing to reorganize SUPERVALU’s
corporate structure (which we refer to in our proxy statement as
the “Holding Company Proposal”). Our proposed holding company
reorganization, for which we are seeing stockholder support at the
upcoming Annual Meeting, is expected to:
- Organize and further segregate our
wholesale and retail operations in an operationally efficient and
strategic manner, including to separate the wholesale and retail
operations held by SUPERVALU INC., our current public company
entity;
- Facilitate our previously announced
strategic transformation plan to sell certain retail assets to
third parties;
- Better segregate the liabilities of the
Company into their respective business segments;
- Increase our strategic, business and
financial flexibility; and
- Enable us to achieve our strategic
transformation plan in a tax efficient manner that may facilitate
the ability to utilize a material portion of SUPERVALU’s capital
loss carryforward, which could generate approximately $300 million
of cash tax benefits for the Company over the next approximately 15
years.
YOUR BOARD HAS OVERSEEN THE
SIGNIFICANT TRANSFORMATION AT SUPERVALU AND WE BELIEVE OUR CURRENT
DIRECTORS ARE CRITICAL TO FURTHERING THE IMPORTANT PROGRESS
UNDERWAY
We believe that the Company’s directors –
Donald R. Chappel, Irwin S. Cohen, Philip L. Francis, Mark
Gross, Eric G. Johnson, Mathew M. Pendo, Francesca Ruiz De
Luzuriaga, Frank A. Savage and Mary A. Winston – have played
critical roles in launching and overseeing the successful execution
of SUPERVALU’s transformation.
SUPERVALU has a diverse and independent Board
that benefits from a breadth of skills and expertise to position
the Company for success. Eight of our nine directors are
independent, and all of our directors are proven leaders with
decades of experience spanning the wholesale, retail, finance,
accounting and food industries, in addition to public company
leadership and board experience.
We have made Board refreshment a priority,
and as a result of this effort, we have appointed new directors who
are playing an integral role in overseeing SUPERVALU’s
transformation. Two of our directors have joined the Board in the
past two years, six of our nine directors have served on the Board
for less than five years and a new independent Chairman was
appointed in July 2017.
Your Board has been – and will continue to be
– a significant agent of change to improve SUPERVALU’s performance
and deliver enhanced value to our stockholders. With a mix of new
and tenured directors, your Board collectively brings the skills,
expertise and knowledge of SUPERVALU and our industry needed to
oversee execution of the Company’s operational and strategic
plans.
YOUR VOTE IS IMPORTANT – HELP
ENSURE SUPERVALU’S CONTINUED PROGRESS AND MOMENTUM
Your Board and management team are committed
to delivering value for all stockholders, and remain focused on the
continued execution of a transformation strategy that is
demonstrating strong momentum and is already delivering measureable
results.
We appreciate your support.
Sincerely,
Donald R. ChappelCHAIRMAN OF THE
BOARD
Mark GrossPRESIDENT AND CHIEF
EXECUTIVE OFFICER
Please use the enclosed WHITE proxy
card today to vote “FOR” ALL nine of SUPERVALU’s highly
qualified directors and the Holding Company Proposal. Simply follow
the easy instructions to vote by telephone, by Internet or by
signing, dating and returning the WHITE proxy card in the
postage-paid envelope provided.
Your vote “FOR” our directors and Holding
Company Proposal will help ensure that you, as a SUPERVALU
stockholder, have a Board focused on sustaining our positive
momentum and creating lasting value for all stockholders.
CAUTIONARY STATEMENTS RELEVANT TO
FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR”
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995.
Except for the historical and factual
information, the matters set forth in this communication,
particularly those pertaining to SUPERVALU’s efforts and
initiatives to transform its business and assets and SUPERVALU’s
expectations regarding the potential impact of those efforts and
initiatives on its future operating results, and other statements
identified by words such as “estimates” “expects,” “projects,”
“plans,” “intends,” “outlook” and similar expressions are
forward-looking statements within the meaning of the “safe harbor”
provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially,
including the ability to continue to transform our business and to
execute on our initiatives on a timely basis or at all, the ability
to recognize the expected benefits of the initiatives, the
potential for disruption to our business during the process, the
ability to execute on the Holding Company Proposal on a timely
basis or at all, the ability to recognize the expected benefits of
the reorganization, the amount and timing of any cash tax benefits
resulting from the reorganization being different than expected,
our ability to complete a sale of certain of our retail assets to
third parties or another strategic transaction prior to the
expiration of our capital loss carryforward in February 2019, the
potential for disruption to our business during the process, the
ability to effectively manage organization changes during the
pendency of or following our business transformation including any
reorganization and related transactions, the requirement that we
offer to repurchase certain indebtedness of the Company and obtain
certain third-party consents as a result of the reorganization and
costs and expenses associated with doing so, and other risk factors
relating to our business or industry as detailed from time to time
in SUPERVALU’s reports filed with the SEC. You should not place
undue reliance on these forward-looking statements, which speak
only as of the date of this communication. For more information,
see the risk factors described in SUPERVALU’s Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, proxy
statement/prospectus for the 2018 Annual Meeting of Stockholders
and other filings with the SEC. Unless legally required, SUPERVALU
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Non-GAAP Financial Measures
(Unaudited)
SUPERVALU’s condensed consolidated financial
statements are prepared and presented in accordance with generally
accepted accounting principles (“GAAP”). The measures and items
identified below are provided as a supplement to our condensed
consolidated financial statements and should not be considered an
alternative to any GAAP measure of performance or liquidity. The
presentation of these financial measures and items is not intended
to be a substitute for or be superior to any financial information
prepared and presented in accordance with GAAP. Investors are
cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool. Certain
adjustments to our GAAP financial measures exclude certain items
that are recurring in nature and may be reflected in our financial
results for the foreseeable future. These measurements and items
may be different from non-GAAP financial measures used by other
companies. All measurements are provided as a reconciliation from a
GAAP measurement. Management believes the measurements and items
identified below are important measures of business performance
that provide investors with useful supplemental information. We
utilize certain non-GAAP measures to analyze underlying core
business trends to understand operating performance. In addition,
management utilizes certain non-GAAP measures as a compensation
performance measure. The items below should be reviewed in
conjunction with SUPERVALU’s financial results reported in
accordance with GAAP, as reported in SUPERVALU’s Quarterly Reports
on Form 10-Q and the Annual Report on Form 10-K for the fiscal year
ended February 24, 2018.
WHOLESALE RECONCILIATION OF OPERATING
EARNINGS FROM CONSOLIDATED SEGMENT FINANCIAL INFORMATION AS
REPORTED TO SUPPLEMENTALLY PROVIDED ADJUSTED EBITDA
The following table was derived from
SUPERVALU’s results of operations previously reported in its fourth
quarter fiscal 2018 earnings release, as previously reported on
Form 8-K, and its fiscal 2018 Annual Report on Form 10-K.
Fiscal Year Ended (In millions)
February 24, 2018 (52
weeks)
February 25, 2017 (52
weeks)
February 27,2016(52
weeks)
Results of operations, as reported:
Net earnings from continuing operations $ 49 $ 35 $ 49
Income tax provision (benefit) 28 (15 ) 4 Equity in earnings of
unconsolidated affiliates (16 ) (5 ) (5 ) Interest expense, net 132
180 193 Total
operating earnings $ 193 $ 195
$ 241
Reconciliation of segment operating earnings
to total operating earnings, as reported Wholesale operating
earnings $ 226 $ 225 $ 218 Retail operating (loss) earnings (13 )
(3 ) 66 Corporate operating loss (20 ) (27 )
(43 ) Total operating earnings $ 193 $
195 $ 241
Reconciliation of segment
operating earnings, as reported, to segment Adjusted EBITDA
Wholesale operating earnings, as reported $ 226 $ 225 $ 218
Adjustments: Supply agreement termination fee — (9 ) — Legal
reserve charge 9 — — Severance costs 4 — — Merger and integration
costs 2 — — Intangible asset impairment charge — — 6 Vendor legal
settlement income (5 ) — —
Wholesale operating earnings, as adjusted 236 216 224
Wholesale depreciation and amortization 84 54 49 LIFO charge 5
— 1 Wholesale
adjusted EBITDA $ 325 $ 270
$ 274
PROTECT YOUR INVESTMENT!
PLEASE VOTE TODAY ON THE
WHITE PROXY CARD!
If you have questions, need
assistance in voting your shares, or wish to change a prior vote,
please contact:
INNISFREE M&A
INCORPORATED
Stockholders Call Toll-Free:(877)
456-2510
Remember:Simply discard any
Green proxy card you may receive from Blackwells. Your Board
does not endorse any of Blackwells’ nominees and we urge you to
NOT submit any vote using Blackwells’ Green proxy card, even as a
protest vote. A withhold vote on Blackwells’ Green proxy
card will revoke any earlier proxy that you may have submitted to
SUPERVALU.
About SUPERVALU INC.(The following information does not
include Associated Grocers of Florida which became part of
SUPERVALU on December 8, 2017)
SUPERVALU INC. is one of the largest grocery wholesalers and
retailers in the U.S. with annual sales of approximately $16
billion. SUPERVALU serves customers across the United States
through a network of 3,324 stores composed of 3,111 wholesale
primary stores operated by customers serviced by SUPERVALU's food
distribution business and 213 traditional retail grocery stores
operated under five retail banners in six geographic regions (store
counts as of December 2, 2017). Headquartered in Minnesota,
SUPERVALU has approximately 31,000 employees. For more information
about SUPERVALU visit www.supervalu.com.
Important Stockholder Information and Where You Can Find
It
SUPERVALU has filed with the SEC a definitive proxy
statement/prospectus and accompanying definitive WHITE proxy card
in connection with its 2018 Annual Meeting of Stockholders. The
definitive proxy statement/prospectus contains important
information about SUPERVALU, the 2018 Annual Meeting of
Stockholders and related matters.
In connection with the Holding Company Proposal, SUPERVALU
Enterprises, Inc., the entity that will be the new holding company
following completion of the reorganization (“SUPERVALU
Enterprises”), has filed with the SEC a Registration Statement on
Form S-4 (Registration Statement No. 333-225586) that includes the
definitive proxy statement of SUPERVALU and a prospectus of
SUPERVALU Enterprises, as well as other relevant documents
concerning the proposed reorganization. The Holding Company
Proposal will be submitted to SUPERVALU’s stockholders for their
consideration. This communication does not constitute an offer to
sell or the solicitation of an offer to buy any securities or a
solicitation of any vote or approval.
INVESTORS AND STOCKHOLDERS ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH OR FURNISHED TO THE SEC, INCLUDING THE
DEFINITIVE PROXY STATEMENT/PROSPECTUS, THE ACCOMPANYING WHITE PROXY
CARD AND ANY OTHER RELEVANT SOLICITATION MATERIALS WHEN THEY BECOME
AVAILABLE BECAUSE THESE DOCUMENTS WILL CONTAIN IMPORTANT
INFORMATION.
A free copy of the definitive proxy statement/prospectus, as
well as other filings containing information about SUPERVALU and
SUPERVALU Enterprises, is able to be obtained at the SEC’s Internet
site (http://www.sec.gov). You are also able to obtain these
documents, free of charge, from SUPERVALU at
http://www.supervaluinvestors.com or by directing a request to
SUPERVALU INC., P.O. Box 990, Minneapolis, Minnesota 55440,
Attention: Investor Relations, telephone (952) 828-4000.
Participants in the Solicitation
SUPERVALU, its directors and certain of its executive officers
and employees may be deemed to be participants in the solicitation
of proxies from SUPERVALU’s stockholders in connection with the
matters to be considered at its 2018 Annual Meeting of
Stockholders. Information regarding the names of SUPERVALU’s
directors and certain of its executive officers and employees and
their respective interests in SUPERVALU by security holdings or
otherwise is set forth in SUPERVALU’s proxy statement/prospectus
for the 2018 Annual Meeting of Stockholders filed with the SEC.
The following table sets forth information as of June 21, 2018
concerning beneficial ownership of SUPERVALU’s common stock by each
director and each of the executive officers named in the Summary
Compensation Table that is included in SUPERVALU’s proxy statement
for the 2018 Annual Meeting of Stockholders and for all of our
current directors and executive officers as a group. The definition
of beneficial ownership for purposes of the following information
includes shares over which a person has sole or shared voting power
or dispositive power, whether or not a person has any economic
interest in the shares. The definition also includes shares that a
person has a right to acquire currently or within 60 days.
Name of Beneficial Owner
Amount and Nature ofBeneficial
Ownership(1)(2)
Percent of Class
Donald R. Chappel 55,449 * Irwin S. Cohen 36,640 * Philip L.
Francis
30435(3)
* Eric G. Johnson 27,033 * Matthew M. Pendo 12,061 * Francesca Ruiz
de Luzuriaga 10,547 * Frank A. Savage 23,226 * Mary A. Winston
8,642 * Mark Gross 174,227 * Rob N. Woseth 84,156 * James W.
Weidenheimer 13,069 * Michael C. Stigers 63,671 * Randy G. Burdick
83,072 * Bruce H. Besanko 32,791 * All current directors and
executive officers as a group (15 persons) 637,364 1.6%
* Less than 1%
(1) All persons listed have sole voting and
investment power with respect to all of the shares listed except
the following non-employee directors who have sole voting power,
but no investment power, over shares held in the SUPERVALU INC.
Directors’ Deferred Compensation Plan (2009 Restatement), as
follows: Mr. Chappel, 54,020 shares; Mr. Cohen, 36,640 shares; Mr.
Francis, 29,578 shares; Mr. Johnson, 27,033 shares; Mr. Pendo,
12,061 shares; Ms. Luzuriaga, 9,833 shares; Mr. Savage, 23,226
shares; and Ms. Winston, 8,642 shares. (2) Includes shares
underlying options exercisable or exercisable within 60 days of
June 21, 2018, as follows: Mr. Gross, 167,760 shares; Mr. Woseth,
73,783 shares; Mr. Weidenheimer, 5,603 shares; Mr. Stigers, 51,450
shares; Mr. Burdick, 72,221 shares; and all current directors and
executive officers as a group, 378,588 shares. (3) Includes
857 shares held in a trust for which Mr. Francis and his spouse
serve as the trustees.
Additional information regarding the interests of these
participants in any proxy solicitation and a description of their
direct and indirect interests, if any, by security holdings or
otherwise, is also included in the definitive proxy
statement/prospectus for the 2018 Annual Meeting of Stockholders,
the accompanying definitive WHITE proxy card and other relevant
solicitation materials and in Form 3s and Form 4s filed by
SUPERVALU’s directors and executive officers after the date of the
proxy statement. These documents (when they become available), and
any and all documents filed by SUPERVALU with the SEC, may be
obtained by investors and stockholders free of charge on the SEC’s
website at www.sec.gov.
1 Based on Blackwells’ definitive proxy statement filed on June
29, 2018, Blackwells holds 5.3% of the Company’s outstanding shares
outright. Taking into account Blackwells’ net short call position,
it has a net long position of 3.9% of the Company’s outstanding
shares. In addition, Blackwells holds a net long position of put
options (which pay out more as the stock price declines)
representing 4.2% of the Company’s outstanding shares.
2 Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Financial
Measures” for a reconciliation to net earnings from continuing
operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180709005391/en/
SUPERVALU INC.For Investors:Steve Bloomquist,
952-828-4144steve.j.bloomquist@supervalu.comorFor Media:Jeff
Swanson, 952-903-1645jeffrey.s.swanson@supervalu.comorJoele Frank,
Wilkinson Brimmer KatcherJames Golden / Leigh Parrish,
212-355-4449
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