SUPERVALU INC. (SVU) to Spin Off Save-A-Lot

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SUPERVALU INC. (NYSE:SVU) announced today that they will be spinning off their Save-A-Lot discount division via an IPO. Current SUPERVALU INC. (NYSE:SVU) shareholders will own at least 80.1% of the new entity once the transaction has taken place.

“We believe that separating Save-A-Lot from Supervalu so that it can operate as an independent, publicly traded company is in the best interests of both Supervalu and Save-A-Lot,” Sam Duncan, CEO of the Minneapolis-based company, said in a letter to shareholders. “As two distinct publicly traded companies, each of Supervalu and Save-A-Lot will be better positioned to focus on its respective businesses, customers and strategic priorities and to capitalize on growth opportunities.”

Each SUPERVALU INC. (NYSE:SVU) shareholder will receive one new Save-A-Lot share for each share of Supervalu that they own. As for how much the new company will aim to raise in the IPO, they have yet to say.The stock is down 8.21% or $0.55 following the news, hitting $6.15 per share. About 3.52 million shares traded hands or 20.55% up from the average. SVU has declined 24.55% since June 3, 2015 and is downtrending. It has underperformed the S&P500 by 19.86%.

From a total of 4 analysts covering Supervalu Inc. (NYSE:SVU) stock, 2 rate it a “Buy”, 0 a “Sell”, and 2 a “Hold”. This means that 50% of the ratings are positive. The highest target price is $12 while the lowest target price is $1. The mean of all analyst targets is $7.75 which is 26.02% above today’s ($6.15) stock price. Supervalu Inc. was the topic of 5 analyst reports since July 24, 2015 according to the firm StockzIntelligence Inc. Telsey Advisory Group maintained shares on October 22 with a “Outperform” rating. Morgan Stanley upgraded SVU stock in a recent report from July 29 to a “Equal Weight” rating.

The institutional sentiment decreased to 0.98 in Q2 2015. It’s down 0.89, from 1.87 in 2015Q2. The ratio turned negative, as 50 funds sold all their SUPERVALU INC. shares they owned while 95 reduced their positions. 46 funds bought stakes while 96 increased their total positions. Institutions now own 206.06 million shares which is 4.35% less than the previous share count of 215.44 million in 2015Q2.

North Tide Capital Llc holds 9.39% of its total portfolio in SUPERVALU INC., equating to 15.00 million shares. Park West Asset Management Llc owns 3.95 million shares representing 2.58% of their total US portfolio. Moreover, Perkins Capital Management Inc has 2.08% of their total portfolio invested in the company, equating to 259,900 shares. The Wisconsin-based Netols Asset Management Inc. has a total of 1.32% of their portfolio invested in the stock. Tipp Hill Capital Management Llc, a New York-based fund reported 175,000 shares owned.

Since August 4, 2015, the stock had 0 insider purchases, and 1 sale for a total of $1.10 million in net activity. Sales Wayne C sold 119,163 shares worth $1.10 million.

SUPERVALU INC. is a wholesale distributor to independent retail clients across the United States. The company has a market cap of $1.79 billion. The Firm leverages its distribution activities by providing wholesale distribution and logistics service solutions to independent retail clients and Save-A-Lot licensees, as well as wholesale distribution to its Retail Food and Save-A-Lot stores. It has 12.27 P/E ratio.

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