Cerberus Close to Supervalu Deal

By SHARON TERLEP

Cerberus Capital Management LP and Supervalu Inc. SVU +13.51% are close to a deal in which the private-equity firm would buy some parts of the grocer and take a stake in the rest of the company, a person with knowledge of the plan said.

Supervalu is set to disclose its quarterly financial results on Thursday and could unveil a deal with Cerberus by then, the person said.

Eden Prairie, Minn.-based Supervalu, parent company to chains such as Shaw's in New England, Jewel-Osco in Chicago and Shop 'n Save in St. Louis, put itself up for sale this past summer amid growing losses and discounts to customers that had yet to drive up sales. The grocer has struggled to improve its business while shouldering a large debt load.

Supervalu's stock rose 13.5% to $2.94 in 4 p.m. composite trading Friday on the New York Stock Exchange, after The Wall Street Journal reported a deal with Cerberus was close. The company's stock is down more than 60% over the past 12 months.

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Supervalu has struggled with its debt load. Above, a distribution center.

In the deal currently envisioned, Cerberus would have a stake in the part of Supervalu it wouldn't buy, which would remain public, the person said. The private-equity firm, which is working on the deal with several real-estate firms, would lead an investment of around $500 million in equity, said the person. That is several hundred million dollars less than earlier discussed, but the investors also wouldn't be taking full ownership of the whole company, previously a possibility.

+The deal structure is designed in part to bridge a gap between how much cash Cerberus is willing to invest and the amount of cash banks have wanted buyers to commit.

Cerberus months ago began seeking financing from banks and planned to invest equity of about $800 million in a deal for the whole company. Banks, which consider the unprofitable chain to be a high-risk investment, at one point pressed Cerberus and its partners to put up closer to $1.3 billion, people familiar with the matter said.

Much of Supervalu's appeal to Cerberus and its partners lies in its Albertsons chain. In 2006, a Cerberus-led group acquired more than 650 underperforming Albertsons stores as part of a larger deal to dismantle that grocer, Albertsons Inc. In the broader deal, Supervalu acquired more than 1,100 Albertsons grocery stores. Cerberus would like to reunite the Albertsons chain, according to people familiar with the matter.

Supervalu, with a market capitalization of $628 million as of Friday, carries more than $6 billion in debt and lease obligations. The company lost $70 million in the first nine months of 2012, compared with a $134 million profit in the same period of 2011.

Write to Sharon Terlep at sharon.terlep@wsj.com