Business Acquisitions Business Acquisitions

9 Months Ended

Dec. 02, 2017

Business Combinations [Abstract]

Business Acquisition

BUSINESS AND ASSET ACQUISITIONS

Associated Grocers of Florida, Inc.

On December 8, 2017, Supervalu completed the acquisition of Associated Grocers of Florida, Inc. (“AG Florida”) pursuant to the terms of an Agreement and Plan of Merger dated October 17, 2017 (the “AG Merger Agreement”) by and among Supervalu, a then wholly owned subsidiary of Supervalu (“AG Merger Sub”), and AG Florida. AG Florida was a retailer-owned cooperative. AG Florida distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia, and had annual sales of approximately $650 in its last fiscal year, which ended on July 29, 2017, estimated by Supervalu.

At the closing of the transaction, AG Merger Sub merged with and into AG Florida and AG Florida became a wholly owned subsidiary of Supervalu. The transaction was valued at $193, comprised of $131 in cash for 100 percent of the outstanding stock of AG Florida plus the assumption and payoff of AG Florida's net debt of $62 at closing.

No amounts of revenue or expenses of AG Florida were included in the third quarter of fiscal 2018 results of operations, financial position or cash flows of Supervalu since the business was not acquired until the fourth quarter of fiscal 2018. Supervalu incurred merger and integration costs of $2 in fiscal 2018 year-to-date related to the AG Florida acquisition.

Acquisition of Unified Grocers, Inc.

On June 23, 2017, Supervalu completed the acquisition of Unified Grocers, Inc. (“Unified”) pursuant to the terms of an Agreement and Plan of Merger dated April 10, 2017 (the “Merger Agreement”) by and among Supervalu, West Acquisition Corporation, a then wholly owned subsidiary of Supervalu (“Merger Sub”), and Unified. The transaction was valued at $390, comprised of $114 in cash for 100 percent of the outstanding stock of Unified plus the assumption and payoff of Unified’s net debt of $276 at closing. The acquisition brought together two complementary companies that uniquely positions Supervalu to efficiently serve a broad range of independent customers and offer a diverse array of value added services, helping customers compete in an increasingly demanding grocery environment. In addition, the acquisition provides opportunities across multiple geographies and is an important part of Supervalu’s ongoing growth effort, including the expansion of Unified’s Market Centre division, a growing business providing specialty and ethnic products to independent customers.

At the closing of the transaction, Merger Sub merged with and into Unified. As a result of the transaction, Unified became a wholly owned subsidiary of Supervalu and the shares of Unified were converted into the right to receive from Supervalu $114 in cash in the aggregate.

Supervalu incurred merger and integration costs of $30 in fiscal 2018 year-to-date related to the Unified acquisition.

The table immediately below summarizes the preliminary fair values assigned to the Unified net assets acquired. As of December 2, 2017, the fair value allocation for the acquisition was preliminary and will be finalized when the valuation is completed. Differences between the preliminary and final allocation could be material. Supervalu’s estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as Supervalu finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisition. The primary areas of the purchase price allocation that are not yet finalized relate to real and personal property, identifiable intangible assets, goodwill, income taxes and deferred taxes.

	Amounts as of the Acquisition Date
Cash and cash equivalents	$	9
Accounts receivable	176
Inventories	237
Other current assets	31
Property, plant and equipment	285
Goodwill	29
Intangible assets	54
Deferred tax assets	(19		)
Other assets	65
Accounts payable	(255		)
Other current liabilities	(89		)
Long-term debt and capital lease obligations	(270		)
Pension and other postretirement benefit obligations	(103		)
Other liabilities assumed	(36		)
Total fair value of net assets acquired	114
Less cash acquired	(9		)
Total consideration for acquisition, less cash acquired	$	105

Recognized goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition. Recognized intangible assets primarily reflect customer relationship intangible assets, which have a weighted average useful life of 15 years.

Combined Results

The following unaudited pro forma information presents the combined results of Supervalu and Unified as if Supervalu had completed the acquisition of Unified on February 27, 2016. As required by GAAP, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined companies would have been had the acquisition occurred at the beginning of the period being presented, nor are they indicative of future results of operations.

	Third Quarter Ended			Year-To-Date Ended
	December 3,   2016   (12 weeks)(1)			December 2,   2017   (40 weeks)		December 3,   2016   (40 weeks)(1)
Net sales	$	3,906		$	12,972	$	12,509
Net (loss) earnings from continuing operations attributable to SUPERVALU INC.	$	(11	)	$	6	$	13
Basic net (loss) earnings from continuing operations per share attributable to SUPERVALU INC.	$	(0.30	)	$	0.15	$	0.33
Diluted net (loss) earnings from continuing operations per share attributable to SUPERVALU INC.	$	(0.30	)	$	0.15	$	0.33

(1) The unaudited pro forma financial information of Unified included in these results reflects the 12 and 40 week fiscal periods ended November 19, 2016.

The pro forma financial disclosures for the AG Florida acquisition have not been included in this Quarterly Report on Form 10-Q for the 12 and 40 week fiscal periods ended December 2, 2017 because the information necessary to complete the disclosure was not yet available.

The acquisitions of AG Florida and Unified brought together complementary companies that uniquely position Supervalu to efficiently serve a broad range of independent customers and offer a diverse array of value added services, helping customers compete in an increasingly demanding grocery environment. In addition, the acquisitions provide opportunities across multiple geographies and are an important part of Supervalu’s ongoing growth effort, including international growth efforts and the expansion of Unified’s Market Centre division, a growing business providing specialty and ethnic products to independent customers.

Cub Franchised Stores

In fiscal 2018 year-to-date, Supervalu paid $5 to acquire the minority equity interests of five limited liability companies that own and operate five Cub stores. Supervalu now owns 100 percent of these companies. The results from these companies will continue to be consolidated in Supervalu's financial statements.

Distribution Center Asset Acquisition

In the third quarter of fiscal 2018, Supervalu paid $61 to acquire the land and building for a distribution center located in Joliet, Illinois. In fiscal 2018 year-to-date, Supervalu also paid $37 to acquire the land and building for a distribution center located in Harrisburg, Pennsylvania. The consideration paid for the acquired assets will be allocated based on the proportionate fair value of the underlying acquired assets prior to the facilities being placed into service.