Supervalu Inc. (NYSE: SVU) has agreed to acquire West Coast grocery store distributor Unified Grocers Inc. in an acquisition valued at $375 million. The deal fuses two complementary grocery wholesalers with combined sales of approximately $16 billion in 2016, amid heavy price competition in the U.S.

Customers shop for produce at a Cub Foods owned by Supervalu Inc. in Crystal, Minnesota.
Customers shop for produce at a Cub Foods owned by Supervalu Inc. in Crystal, Minnesota. Bloomberg News

Unified Grocers is a retailer-owned wholesale grocery distributor founded in 1922. The target, headquartered in Commerce, California, supplies independent retailers throughout the Western U.S. Unified Grocers, through six distribution centers, offers resources and grocery materials for its customers to compete in the supermarket industry. Following completion of the merger, Unified Grocers will be a wholly-owned subsidiary of the buyer.

Supervalu, based in Minnesota, is one of the largest grocery retail suppliers in the U.S. Together, Supervalu and Unified Grocers operate 24 distribution centers supplying more than 3,000 stores and customers across 46 states. The deal is expected to close in the second quarter of 2017. In October 2016, Supervalu off-loaded its Save-A-Lot grocery chain business for nearly $1.37 billion in cash. The deal occurred amid heavy price competition in the U.S., reinforcing a broader shake-up and consolidation in the grocery store sector.

Other related deals in the grocery sector include: Haggen Inc.’s purchase of 146 grocery stores on the west coast of the U.S. for an undisclosed amount; Apollo Global Management LLC's (NYSE: APO) deal to buy grocer The Fresh Market Inc. (Nasdaq: TFM) for about $1.4 billion in cash; and Kroger Co.'s (NYSE: KR), one of the largest U.S. grocery store chains, acquisition of Harris Teeter Supermarkets Inc. for $2.5 billion in cash.

RBC Capital Markets LLC is serving as financial adviser to Supervalu, while Faegre Baker Daniels LLP and Cleary Gottlieb Steen & Hamilton LLP are acting as legal counsel. Moelis & Co. LLC (NYSE: MC) is acting as financial adviser to Unified Grocers and Sullivan & Cromwell LLP is serving as legal counsel.

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Kamaron Leach

Kamaron Leach

Kamaron Leach joined SourceMedia in 2016, serving as Reporter of Mergers & Acquisitions. Kamaron writes the Finance Finesse column about investment banking and lending, and also covers the media and entertainment sector.