FAQs

What are the terms of the transaction? How does UNFI plan to finance this transaction? You’re taking on a lot of debt with this acquisition. What will your leverage ratio be following close? Is the transaction subject to a financing condition? Will you issue stock? How did you arrive at the price? What comparable transactions did you look at? What is the strategic rationale? Why now? What will the margin profile for the combined companies look like going forward? What will the full financial profile look like for UNFI post close? How will UNFI and SUPERVALU partner with each other? What are the plans for the retail business? How fast do you plan on divesting? Will the combined headquarters continue to be in Providence, R.I. and Minneapolis? Will UNFI culture and commitment to organic foods be maintained? Will UNFI customers have access to SUPERVALU products? And will UNFI have access to a broader customer base for natural foods products? How will this work? Will this announcement affect our contracts with current customers? Will UNFI continue to supply Amazon / Whole Foods Market? Do you expect any antitrust or regulatory issues? What are the closing conditions for this transaction? When is this transaction expected to close? How will the companies be integrated? Have you spoken to your largest shareholders? What has been their reaction? Are you confident in your synergy projections? Do you expect revenue synergies as well? Where do the synergies come from? Do you expect to lose customers or suppliers following this transaction? Are you concerned about tarnishing your reputation as an organic, health conscious company? What is the impact of this transaction on fiscal 2019? Will it be dilutive to fiscal 2019? Does this deal require shareholder approval? Is there a go-shop provision? When will the vote take place? Is there a breakup fee? What is it and how does it execute? What happens if the transaction is not approved? Will executives receive any special compensation package as a result of the sale? Does UNFI plan on further acquisitions? SUPERVALU has not been performing well. Why are you confident UNFI can manage the organization better? What about SUPERVALU’s extensive liabilities? What will the full financial profile look like for UNFI post close?

What are the terms of the transaction?

UNFI will acquire SUPERVALU for $32.50 per share in cash, or approximately $2.9 billion, including the assumption of outstanding debt and liabilities.

UNFI expects to finance the transaction substantially with debt. After closing, and in a responsible manner with a view to limiting retained liabilities, UNFI plans to divest any outstanding SUPERVALU retail business.

Upon closing, UNFI’s net debt-to-EBITDA ratio is expected to be high. With strong cash flows, proceeds from divestitures and commitment to reducing debt, the company anticipates reducing leverage in the first three years.

The transaction, which has been approved by the Boards of Directors of UNFI and SUPERVALU, is subject to the approval of SUPERVALU shareholders, regulatory approvals and other customary closing conditions, and is expected to close in the fourth quarter of calendar 2018.

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How does UNFI plan to finance this transaction?

UNFI expects to finance the transaction substantially with debt and Goldman Sachs provided committed financing in the transaction.

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You’re taking on a lot of debt with this acquisition. What will your leverage ratio be following close?

Upon closing, UNFI’s net debt-to-EBITDA ratio is expected to be high. With strong cash flows, proceeds from divestitures and commitment to reducing debt, the company anticipates reducing leverage by year three. The company is committed to maintaining a strong credit rating profile and will prioritize de-levering.

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Is the transaction subject to a financing condition?

No, the transaction is not subject to a financing condition. UNFI has taken all the necessary actions to obtain funds sufficient to fund the transaction and other amounts to be paid at closing. In addition, SVU has agreed to cooperate with and provide assistance to UNFI in connection with its financing efforts.

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Will you issue stock?

We have no intention to do so.

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How did you arrive at the price? What comparable transactions did you look at?

We have spent a great deal of time on diligence for this combination and worked with a number of advisors. We believe this deal makes great strategic and financial sense and will transform the company and position us well in the long-term.

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What is the strategic rationale? Why now?

The transaction creates North America’s premier food wholesaler and accelerates UNFI’s “build out the store” growth strategy by expanding our product portfolio in the fastest growing segments and broadening our universe of customers and suppliers.

Diversifies customer base: The transaction will greatly expand UNFI’s customer base and exposure across channels, including those where demand for better-for-you products is increasing and UNFI is under-represented. It will also unlock new opportunities through a comprehensive product portfolio.

Enables cross-selling opportunities: UNFI will benefit from its ability to deliver comprehensive and expanded offerings, including the addition of high-growth perimeter categories such as meat and produce to UNFI’s natural and organic products.

Expands market reach and scale: The wider geographic reach and greater scale of the combined entity is expected to increase efficiencies and effectiveness.

Enhances technology, capacity and systems: The combined entity plans to leverage scalable systems to streamline its processes, more efficiently meet the needs of its customers and reduce future capital expenditures.

Delivers significant synergies: Through this combination, UNFI will be positioned to realize run rate cost synergies of more than $175 million by year three.

Accelerating growth: After year one, the transaction is projected to generate low double-digit Adjusted EPS and EBITDA growth, excluding one-time costs.

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What will the margin profile for the combined companies look like going forward?

Profitability will benefit from alignment of inbound logistics and the addition of professional services, which is a higher margin business.

UNFI is the largest distributor of natural and organic products in the U.S. and Canada, and SuperValu is the largest publicly traded food wholesaler in the U.S. This combination can enable UNFI to deliver greater economies of scale and strengthen its position by serving a greater universe of customers with the full spectrum of food products, therefore enhancing the company’s profitability.

An immediate benefit of a completed acquisition will be an expanded and diversified customer base, including many of the fastest growing retailers and e-tailers, across a wider geographic reach. There is potential to enhance existing customer relationships as well as to open opportunities to serve new customers. SuperValu is currently primary distributor to thousands of customer locations in 48 states, many of whom are not currently serviced by UNFI.

Supervalu distributes to those customers from its 29 distribution facilities, many of which are located in areas that are not covered by UNFI’s current footprint. For many of those customers, demand for healthier products is accelerating, and UNFI is poised to leverage those opportunities.

The wider geographic reach and greater scale resulting from the acquisition is expected to increase efficiencies and effectiveness, which we also expect will stabilize and increase margins over time. Such efficiencies include those gained from combining our technology, infrastructure and operations systems. We will have the opportunity to streamline processes, to more efficiently meet the needs of customers and reduce future capital expenditures. We also anticipate increased SG&A efficiency and the ability to increase capacity, optimize lease contracts and reduce fleet-related expenses. These synergies are expected to create a significant financial impact, including a run-rate cost synergy opportunity of more than $175 million by year three.

Long-term guidance will be provided on our fourth quarter fiscal 2018 call in September.

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What will the full financial profile look like for UNFI post close?

After the acquisition is completed, net sales of the combined company is expected to exceed $21 billion, and the companies will share a combined adjusted EBITDA of over $650 million. (Please note that this EBITDA figure does not include any forecasted data for when the transaction is complete, and is based on the trailing four reported quarters, excluding synergies and the retail business.)

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How will UNFI and SUPERVALU partner with each other?

UNFI and SUPERVALU operations are tailored around the unique demands of the customer base each company services. The combination will enable us to serve a larger and more diverse customer base with a broader range of products particularly in high growth categories such as produce and protein.

UNFI’s product mix of better-for-you products are underrepresented in supermarkets and mass grocery. At the same time, these channels are looking to expand in natural organic and specialty products to meet the growing demand for such products. We’ll be able to move faster to bring these high-growth products to these channels by leveraging SUPERVALU’s strong relationships. Conversely, we’ll be able to capitalize on SUPERVALU’s strength in perimeter-store food categories.

The greater scale of the combined company is expected to enable us to achieve significant synergies by driving further efficiencies in our distribution network and infrastructure.

Ultimately, we plan to take the best practices, systems and technologies from both companies to improve operational efficiencies, customer services and product levels and corporate functions.

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What are the plans for the retail business? How fast do you plan on divesting?

UNFI expects to divest any outstanding SUPERVALU retail business that exists at closing over time, in a responsible manner and with a view to limited retained liabilities.

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Will the combined headquarters continue to be in Providence, R.I. and Minneapolis?

UNFI expects to maintain both headquarters in current locations during the integration period and will continue to evaluate facility needs going forward.

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Will UNFI culture and commitment to organic foods be maintained?

UNFI will maintain its commitment to sourcing the highest-quality and innovative natural, specialty and organic products across its distribution network.

In fact, this transaction will enable us to expand these better-for-you products into new channels.

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Will UNFI customers have access to SUPERVALU products? And will UNFI have access to a broader customer base for natural foods products? How will this work?

Consistent with UNFI’s “building out the store” strategy, UNFI will have access to SUPERVALU’s brands and products (including high-growth product categories such as meat and produce), and vice versa, to provide both center-store and perimeter-store products from two closely affiliated distributors. This will enable UNFI and SUPERVALU to address evolving customer needs through enhanced distribution capabilities, as well as a diversified offering across both natural, organic and specialty and conventional products.

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Will this announcement affect our contracts with current customers?

We do not anticipate this announcement to affect our customer contracts. We believe our customers will benefit from the significant opportunities this deal will offer, given the increased scale and product offerings it brings UNFI. So far, customer feedback has been positive. Customers are excited by the opportunities this deal provides.

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Will UNFI continue to supply Amazon / Whole Foods Market?

We do not anticipate that this announcement will affect our customer contracts, including Whole Foods. We believe our customers will see the significant opportunities and benefits this deal will offer them with the increased scale and product offerings it brings UNFI.

UNFI's contract with Whole Foods runs through 2025, and we do not anticipate that current contract to change.

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Do you expect any antitrust or regulatory issues?

Both sides are committed to completing the transaction, which is highly complementary, and we look forward to working constructively with regulators to receive the necessary approvals.

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What are the closing conditions for this transaction?

The transaction is subject to approval by SUPERVALU stockholders and customary closing conditions including antitrust regulatory approval.

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When is this transaction expected to close?

The transaction is currently expected to close in the fourth quarter of calendar year 2018 and until then SUPERVALU and UNFI will continue to operate independently.

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How will the companies be integrated?

Sean Griffin, UNFI Chief Operating Officer, will lead the SUPERVALU business post-close and will lead the integration committee.

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Have you spoken to your largest shareholders? What has been their reaction?

We are regularly engaged in dialogue with many of our largest shareholders. We have discussed with shareholders and will continue to provide more information, in accordance with our normal cadence the compelling strategic and financial logic of this transaction.

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Are you confident in your synergy projections? Do you expect revenue synergies as well?

Yes, we are comfortable. Yes, but potential revenue synergies are not included in our synergy estimates.

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Where do the synergies come from?

These synergies will be derived from implementing the best practices of each organization with the intent to unlock process and resource improvements therefore enhancing overall efficiency and productivity.

The combined company is expected to benefit from new revenue opportunities derived from the expanded product offering and customer base. In addition, scale and service benefits, enhanced commercial terms, streamlined professional services and operational optimization benefits are expected to be significant.

The combined organization will also benefit from the consolidation of IT systems and infrastructure to leverage technology advancements to streamline processes and reducing capital expenditure needs.

Lastly, the combination improves capacity utilization to gain the related efficiencies and provides the opportunity to reduce overall costs and avoid certain future capital expenditures.

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Do you expect to lose customers or suppliers following this transaction? Are you concerned about tarnishing your reputation as an organic, health conscious company?

UNFI will maintain its commitment to sourcing the highest-quality natural, innovative and organic products across its distribution network. We will continue to provide all the natural and organic products our customers are accustomed to receiving from us as well as more conventional products build out their entire store.

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What is the impact of this transaction on fiscal 2019? Will it be dilutive to fiscal 2019?

We have provided fiscal year 2019 guidance on our Q4 earnings call in September.

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Does this deal require shareholder approval?

The proposed transaction is subject to approval by SUPERVALU stockholders and customary closing conditions including regulatory approval.

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Is there a go-shop provision?

No. In fact, there is a non-solicit clause and a termination fee.

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When will the vote take place?

SUPERVALU shareholder vote is required and is communicated through a proxy filing from SUPERVALU.

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Is there a breakup fee? What is it and how does it execute?

Yes, the details are provided in the merger agreement, which was filed on July 26.

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What happens if the transaction is not approved?

Customary break-up fees are addressed in the merger agreement, which was filed on July 26.

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Will executives receive any special compensation package as a result of the sale?

Details about UNFI executive compensation packages can be found in our public filings with the SEC and will continue to be provided in our filings on a go forward basis. The SVU proxy statement will set forth the compensation arrangement of SVU executives as a result of this transaction.

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Does UNFI plan on further acquisitions?

Strategic M&A is a core part of our long-term growth strategy. However, this is a large acquisition, and our focus at this time will be on successfully completing the integration.

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SUPERVALU has not been performing well. Why are you confident UNFI can manage the organization better?

SUPERVALU is a well-run and efficient distribution business with deep talent, and a diversified product and customer base. They are also heavily focused on our core growth plan, which includes fresh perimeter options including produce. They also come with a highly scalable technology infrastructure.

Over time, we plan to divest SUPERVALU’s retail business in a thoughtful and economic manner. We will announce the related details of such divestitures, in due course.

UNFI’s deeply talented operations team will bring value to the SUPERVALU network, and with Sean Griffin at the helm, we have a high degree of confidence that synergies, excellence, and expansion will be delivered.

Ultimately, we view this as a highly complementary transaction.

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What about SUPERVALU’s extensive liabilities?

We are confident that separating supply agreements in one or more retail banners will advance the sale of banners sooner. We intend to divest these retail assets in a thoughtful and economic manner.

We are actively exploring opportunities to minimize liabilities associated with SVU legacy businesses, including retail business lines.

UNFI’s deeply talented operations team will bring value to the SUPERVALU network, and with Sean Griffin at the helm, we have a high degree of confidence that synergies, excellence, and expansion will be delivered.

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What will the full financial profile look like for UNFI post close?

After the acquisition is completed, net sales of the combined company is expected to exceed $21 billion, and the companies will share a combined adjusted EBITDA of over $650 million. (Please note that this EBITDA figure does not include any forecasted data for when the transaction is complete, and is based on the trailing four reported quarters, excluding synergies and the retail business.)

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