Supervalu sale faces long odds

While Supervalu Inc. has publicly put itself on the sales block, don't expect the company to be sold in one piece or for any of the pieces to sell quickly, if at all, given uncertainties facing the embattled grocer.

That was the consensus of stock analysts Thursday, a day after Supervalu said it was reviewing ways to boost shareholder value, including selling all or parts of the company.

Supervalu was the biggest loser Thursday on the New York Stock Exchange, its shares down $2.60, or 49 percent, closing at $2.69.

Supervalu's announcement of a possible sale came after the market closed Wednesday, along with news that the Eden Prairie-based company had suspended its dividend and suffered a terrible first quarter.

"They are in a lot of trouble," said Michael Keara, a stock analyst at Morningstar. The company is in a deepening downward spiral as it continues to lose business to lower-priced competitors.

Owner of the Twin Cities' Cub Foods, Supervalu is one of the biggest national supermarket operators with 11 separate chains. But it's "highly unlikely" a buyer would snap up the whole company, said Scott Mushkin, an analyst at Jefferies.

Keara put the odds of a one-shot acquistion at "zero." While there's been speculation that a private equity outfit might make a run at Supervalu, Keara said that's unlikely given that Supervalu already is saddled with significant debt.

The chance of an industry rival buying Supervalu is also highly unlikely, he said. Grocery discounters like Wal-Mart and Target have entirely different business models.

And Supervalu's conventional grocery rivals -- Kroger, for instance -- are already gaining maket share at the expense of Supervalu. "You're already taking market share, why commit the capital [to buy Supervalu]?"

That maxim could apply to buying individual Supervalu chains, too, analysts say, particularly laggards such as Acme and Shaw's in Philadelphia and New England.

Supervalu has far from given up, and Wednesday announced it is accelerating a price-cutting program, a key to its turnaround plans. If Supervalu succeeds, some competitors might take a harder look at buying Supervalu assets to avoid the cost of an extended price war, Mushkin wrote in a research note.

On the other hand, potential buyers could simply wait out a price war. Buyers don't have the incentive to pay full price for a Supervalu asset "when there is a strong possibility that they could buy it cheaper if [Supervalu's] turnaround fails to materialize," UBS analyst Jason DeRise wrote in a research note.

Shaw's, Acme and Albertsons, the latter being Supervalu's big Western chain, all appear to be struggling, Feeney wrote. "That leaves Jewel, [Supervalu's] leading banner in the largest geography, as the great unknown."

Jewel is the commanding leader of the Chicago grocery market, with a share of more than 30 percent.

Any sale or other strategic action by Supervalu "could be very complicated," wrote JPMorgan analyst Ken Goldman.

The company has a complicated organizational structure. It has a lot of debt, and it's not clear how that debt would be allocated in a breakup. And it has a lot of "pension exposure," Goldman wrote. Supervalu is party to several pension plans through its various chains.

"The unknowns are vast," Goldman wrote.