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Buyout rumors push Supervalu stock up 6%
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Supervalu Inc. shares rose the most in almost a year and trading of bullish options surged to a record Friday on speculation that the Eden Prairie-based grocery chain will be acquired.
The shares climbed 6.6 percent to close at $17.13, their biggest gain since April 2009. Trading of calls to buy the shares jumped to more than 37,000 contracts, 40 times the four-week average.
"The shares are rising on rumors" of a leveraged buyout, said Mario Barraza, a New York-based analyst with Kevin Dann & Partners, which recommends that investors buy the stock. He declined to speculate on whether a leveraged buyout or acquisition was possible.
Supervalu spokesman Steve Bloomquist said the company wouldn't comment on market rumors.
Supervalu has about $8 billion in long-term borrowings, giving it a total debt-to-capital ratio of about 77 percent, according to Bloomberg data. Kroger Co., the largest U.S. grocery chain has a total debt-to-capital ratio of 62 percent.
That much debt makes a leveraged buyout "highly unlikely, but you never say never," said Scott Mushkin, an analyst with Jefferies & Co. in New York.
A possible buyer could sell some of Supervalu's retail chains and use the proceeds to pay down debt so that Supervalu could focus on its wholesale distribution business, according to David Livingston, a supermarket consultant with DLJ Research in Waukesha, Wis.
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