NEW YORK ( TheStreet) -- Five brands of struggling supermarkets chain Supervalu (SVU - Get Report) will be bought by Cerberus Capital Management and a consortium of real estate firms for $3.3 billion.
While the proposed deal is significant for Supervalu, it also means Cerberus won't buy the supermarkets chain whole.
Cerberus will buy Supervalu's Albertsons brand and its Acme, Jewel-Osco, Shaw's and Star Market food stores, in addition to the company's Osco and Sav-on pharmacies.
Cerberus won't be acquiring all of Supervalu, and after the closing of the deal, the supermarkets chain will remain publicly traded. A set of financial transactions accompanying the deal may help alleviate Supervalu's debt burdens.The deal, which also includes Kimco Realty Corporation (KIM - Get Report), Klaff Realty, Lubert-Adler Partners and Schottenstein Real Estate Group in the buying consortium is structured in multiple parts and will keep Supervalu as a publicly traded company with remaining supermarkets businesses. Cerberus and the investor consortium will buy Supervalu's Albertson's brand for $100 million in cash and approximately $3.2 billion in debt. The group will also take a 30% stake in Supervalu's remaining shares at a price of $4 a share. The investor group will, at minimum, own nearly 20% of Supervalu's stock, according to the press release. Supervalu shares rose over 12% to $3.42 in early Thursday trading. According to a press release announcing the deal, Supervalu will remain a large food wholesaler, with 1,950 stores nationwide spread across its Cub, Farm Fresh, Shoppers, Shop 'n Save and Hornbacher's. Those stores, Supervalu says, are expected to generate $17 billion in annual revenue, in a move to focus on "right-sizing operations and maximizing efficiencies across the