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The dollar terms of the Rainbow deal — $65 million plus the cost of store inventory — are small for both Roundy’s and Supervalu. And Supervalu will pay only $35 million of the total purchase price.
Still, the deal bolsters Supervalu in its largest retail market, the Twin Cities. Since Supervalu sold its big grocery chains in the eastern and western United States last year, Cub has become its largest banner. After the close of the Rainbow deal, there will be 66 Cub Foods in the Twin Cities.
Supervalu gets more than new stores out of the deal. The grocery wholesaler — half of its revenue comes from food distribution — will supply all 18 Rainbow stores being sold. Supervalu will have 100 percent ownership of 11 of the 13 Rainbow pharmacies included in the deal.
“Supervalu is thrilled to participate in this consortium of retailers that is acquiring Rainbow stores,” Supervalu CEO Sam Duncan said in a statement. The company declined to make an executive available for an interview.
For Lund Food Holdings, whose store count has been growing in recent years, the Rainbows it is buying in Eden Prairie and Woodbury fit well with its plans. “They are absolutely two areas of the Twin Cities we have been interested in expanding in for quite some time,” said Lund spokesman Aaron Sorenson.
The company chose to operate the stores under its Byerly’s brand because Byerly’s outlets tend to be the same size as Rainbow stores, around 60,000 square feet. Supermarkets under the Lunds brand are closer to 40,000 square feet, Sorenson said.
Lund is buying a third Rainbow store, in Plymouth, one of the six supermarkets that will keep the Rainbow name.
St. Thomas’ Brennan questioned holding on to the Rainbow moniker. The banner will have a diminished presence and won’t be able to advertise as cost-effectively.
“I don’t see [keeping the Rainbow name] as a sustainable strategy,” he said.
Rainbow has its fans, of course, and they will miss the banner.
As a longtime Rainbow shopper, Michael Gunderson of Eagan said in an e-mail that he’s very disappointed that his favorite store will be converted to a Cub. The Eagan Rainbow had good sales, and its employees were always friendly, he wrote.
“Rainbows were always merchandised and laid out nicely, Cub stores are stale and boring to me.”
Mike Hughlett • 612-673-7003