SVU Supervalu Inc. (delisted)

By Allison Prang and Heather Haddon 

United Natural Foods Inc. is buying grocery-store chain Supervalu Inc. for about $1.3 billion.

The deal, valued at $2.9 billion including debt, is expected to help United Natural expand and diversify its customer base and cross-sell products, the companies said.

United Natural specializes in natural and organic distribution, with more than one-third of its business coming from its long-running supply contract with Amazon.com Inc.'s Whole Foods. The deal would vastly broaden United Natural's reach into more conventional foods and ethnic markets.

The company's offer of $32.50 a share represents a 67% premium to Supervalu's closing stock price Wednesday. Shares of Minneapolis-based Supervalu, down 10% this year, rose 64% premarket.

Shares of United Natural Foods, down 16% this year, fell 7.4% premarket.

Blackwells Capital LLC has pressured Supervalu for months to shake up its business, nominating an alternative slate of six board members and highlighting concerns about the company's pay and executive use of the company plane. Shareholders were to vote on the competing board slate and other Blackwells proposals next month.

Supervalu had pushed back at the investment firm's campaign, saying it was working to shed its underperforming retail operation in favor of its wholesale division. Supervalu also questioned the extent of Blackwell's stake in the company.

Blackwells had cited United Natural as one company that would benefit from acquiring Supervalu, and thereby boosting its stock, according to a February presentation from the investment firm.

Blackwells didn't immediately respond to a request for comment.

Bankers have expected more consolidation in food distribution, given pressures on costs. Supervalu has acquired regional distributors in the past two years. United Natural has also struggled to meet volume demands after Amazon bought Whole Foods last year, boosting sales.

(END) Dow Jones Newswires

July 26, 2018 09:09 ET (13:09 GMT)

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