Item 1.01.
Entry Into a Material Definitive Agreement.
Merger Agreement
On July 25, 2018, SUPERVALU INC., a Delaware corporation (“
SUPERVALU
,” or the “
Company
”), entered into an Agreement and Plan of Merger (the “
Merger Agreement
”) with SUPERVALU Enterprises, Inc. (“
SUPERVALU Enterprises
”), a Delaware corporation and wholly owned subsidiary of SUPERVALU, United Natural Foods, Inc. (“
UNFI
”), a Delaware corporation, and Jedi Merger Sub, Inc., a Delaware corporation and newly formed wholly owned subsidiary of UNFI (“
Merger Sub
”), providing for the acquisition of SUPERVALU by UNFI.
Under the terms of the Merger Agreement, Merger Sub will merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of UNFI (the “
Merger
”). Pursuant to the Merger Agreement, each share of Company common stock outstanding at the effective time of the Merger will be converted into the right to receive a cash payment equal to $32.50 per share, without interest (the “
Merger Consideration
”).
Pursuant to the Merger Agreement, at the effective time of the Merger, (a) each outstanding Company stock option will be rolled over into options exercisable for UNFI common stock and (b) each restricted share award, restricted stock unit award, performance share unit award and deferred stock unit award will be converted into the right to receive a cash-settled award equal to the product of (i) the number of shares of Company common stock subject to such award immediately prior to the effective time (in the case of performance share unit awards, subject to the vesting specified in the applicable award agreement for a “change of control” transaction) and (ii) the Merger Consideration, less any applicable taxes, which converted awards will continue to be subject to the same terms and conditions that were otherwise applicable to the underlying award (except that performance share unit awards will no longer be subject to any performance-based vesting conditions).
The Board of Directors of the Company has unanimously (1) determined that it is fair to and in the best interests of the Company and its stockholders (as applicable), and declared it advisable, to enter into the Merger Agreement, (2) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement, including the Merger and (3) resolved to recommend the adoption of the Merger Agreement by Company stockholders, who will be asked to vote on the adoption of the Merger Agreement at a special stockholders meeting.
The consummation of the transactions contemplated by the Merger Agreement is also subject to the satisfaction or waiver (if permitted by law) of certain closing conditions, including, among other things, (i) the accuracy of the representations and warranties of the parties (generally subject to a “material adverse effect” qualification), (ii) the performance of the covenants of the parties in all material respects, (iii) receipt of approval, or expiration or termination of waiting periods, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and (iv) approval by holders of a majority of the Company’s common stock outstanding and entitled to vote.
The parties are required to use reasonable best efforts to take all reasonable actions to complete the Merger. If necessary to obtain the requisite antitrust clearances, the parties must use reasonable efforts to: (1) divest, license or otherwise dispose of any assets, products or business lines, (2) create, terminate or divest relationships, ventures or contractual obligations or (3) otherwise agree to restrictions or limitations on the combined company’s businesses (clauses (1)–(3), “
Remedial Actions
”), provided that UNFI and its affiliates will not be required to agree to take any Remedial Action if such action, taken together with all other Remedial Actions, would reasonably be expected to have a material adverse effect on UNFI and its subsidiaries (including the Company and its subsidiaries), taken as a whole, after giving effect to the consummation of the Merger.
The Merger is not subject to a financing condition, and UNFI has undertaken to take all actions necessary to obtain funds sufficient to fund the Merger Consideration and other amounts to be paid at closing. The Company has agreed to cooperate with and provide assistance to UNFI in connection with its financing efforts.
The Company has also agreed (1) to cause a stockholder meeting to be held to obtain the Company’s stockholder approval, (2) to not solicit, enter into discussions concerning, or provide confidential information in connection with, alternative transactions, subject to a customary provision that allows the Company under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that the Company’s board of directors has determined in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or could reasonably be expected to lead to a “superior proposal” and (3) subject to certain exceptions, that the Company’s board of directors will recommend that the stockholders of the Company vote to approve the Merger Agreement. The Merger Agreement also contains a “fiduciary out” provision under which the Company’s board of directors may, subject to certain requirements set forth in the Merger Agreement (including consultation with the Company’s financial advisors and outside legal counsel), (i) change its recommendation to the Company’s stockholders to approve the Merger Agreement in response to an “intervening event” or a “superior proposal” or (ii) terminate the merger agreement in order to enter into a “superior proposal” received from a third party.
The Merger Agreement also contains certain termination rights for both the Company and UNFI, including that either the Company or UNFI may terminate the Merger Agreement if the Merger is not completed on or prior to January 25, 2019 (the “
End Date
”), subject to extension until up to April 25, 2019 for the purpose of obtaining regulatory clearances. If the Merger Agreement is terminated under certain circumstances, including by UNFI in response to a change in the recommendation of the Company’s board of directors to the Company’s stockholders, or by the Company to accept a “superior proposal,” the Company may be required to pay UNFI a termination fee in the amount of approximately $40.5 million.
The Merger is expected to close during the fourth quarter of calendar year 2018.
SUPERVALU filed a definitive proxy statement with the Securities and Exchange Commission (the “SEC”) on July 2, 2018, in connection with its annual meeting, which included a proposal for the reorganization of SUPERVALU’s corporate structure into a holding company structure, with SUPERVALU Enterprises as the holding company (the “Holding Company Merger”), and certain related transactions (including the Holding Company Merger, the “Pre-Closing Reorganization”). Once the Holding Company Merger is completed, SUPERVALU Enterprises, rather than SUPERVALU, will be the “Company” for purposes of the Merger Agreement.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement.
The Merger Agreement and the above description of the Merger Agreement have been included to provide investors with information regarding the terms of the Merger Agreement. It is not intended to provide any other factual information about UNFI, SUPERVALU or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of specific dates, were solely for the benefit of the parties to the Merger Agreement and may be subject to limitations agreed upon by the parties in connection with negotiating the terms of the Merger Agreement, including being qualified by confidential disclosures made by each party to the other for the purposes of allocating contractual risk between them. In addition, certain representations and warranties may be subject to a contractual standard of materiality different from those generally applicable to investors and may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts. Information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by UNFI or SUPERVALU. Investors should not construe the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of UNFI, SUPERVALU or any of their respective subsidiaries, affiliates or businesses.