Blackwells launches proxy battle with Supervalu

Investment firm Blackwells Capital has launched a proxy battle with Supervalu, and is stepping up its months-long push for the wholesaler to spin off its retail operations and sell itself, among other initiatives.

New York-based Blackwells said it would nominate six independent directors to Supervalu’s board, including veteran supermarket executives Rick Anicetti, the longtime president and CEO of Food Lion who later held those titles at The Fresh Market, and Frank Lazaran, who previously had been chairman and CEO of Marsh Supermarkets and president and CEO of Winn-Dixie.

“We continue to believe substantial value exists in Supervalu’s assets, people and business relationships,” said Jason Aintabi, managing partner at Blackwells Capital, in a statement. “But, the time has long passed for incrementalism. To unlock value for shareholders, the company must change fundamentally, and change must begin at the board level. We believe a different, and more cohesive and experienced, group of directors are needed to effectuate real change at Supervalu.

The “incrementalism” Aintabi mentioned was a reference to Minneapolis-based Supervalu’s recent sale of 21 of its 38 Farm Fresh stores in the Virginia Beach area, according to the Wall Street Journal. The sale was part of an ongoing effort at Supervalu to restructure its operations to focus on its wholesale business and divest its weaker retail assets in wake of its 2016 sale of the Save-A-Lot division.

Blackwells, which said it owns a 4.9% stake in Supervalu, said all of the directors nominated would be independent and are not affiliated with Blackwells Capital.

The investment firm, which has been pressuring Supervalu to make changes to boost its share price since last year, said it has detailed several specific opportunities for Supervalu to increase shareholder value, including:

• A sale-leaseback of Supervalu’s wholesale distribution center real estate to reduce net leverage and significantly boost share price;

• A sale or spinoff of the retail segment to transform Supervalu into a pure-play wholesaler; and

• A sale or merger of Supervalu’s wholesale business to or with a competitor.

In a letter to Supervalu’s board in February, Blackwells said it has been disappointed in what it described as slow progress toward change at Supervalu.

“In our view, the lackadaisical, misguided and value-destructive complacency of the company’s leadership necessitated our request for representation on the board of directors,” Blackwells wrote. “We conclude that the board’s passivity and the company’s persistent underperformance have left us with no alternative but to run an election contest and give all shareholders an opportunity to vote for enhanced board leadership and support a mandate to explore all alternatives to unlock value.”

Blackwells noted that Supervalu’s share prices had declined by more than 45% in the past year, compared with a 19.6% gain for the S&P 500. Supervalu’s shares were trading at about $14.83 Thursday afternoon, compared with a 52-week high of $31.29.

Blackwells had initially proposed nominating three directors to Supervalu’s board, but on Thursday unveiled a slate of six new director nominees. In addition to Anicetti and Lazaran, the other directors proposed by Blackwells are Steven H. Baer, a financial executive with turnaround experience; Robert “Chris” Kreidler, a former chief financial offer at Supervalu rival C&S Wholesale Grocers, where Supervalu CEO Mark Gross also worked; James J. Martell, a former executive with several logistics companies; and Sandra E. Taylor, a former senior VP at Starbuck Corp. who specializes in sustainable business practices.

Supervalu issued an extensive response to the Blackwells proposals and its proposed slate of directors, noting that Blackwells “effectively seeks control of the company” by nominating six directors, out of a total of nine on the company’s board. Blackwells “clearly seeks representation that is highly disproportionate to Blackwells’ stake,” which is about 2% of Supervalu shares excluding out-of-the-money options, according to Supervalu.

Supervalu said it has already been pursuing strategies to delivery value for shareholders, including growing the wholesale business to nearly $13 billion, or about 75% of the company’s annual sales, and mulling over the disposition of some retail assets, which resulted in last week’s Farm Fresh divestments.

“Our board and management team have been strong stewards of the company’s capital and assets,” Supervalu said in a statement, which it said was issued by its board of directors.

Supervalu said it has met with representatives of Blackwells several times to “discuss overlapping objectives and attempt to reach a constructive path forward. Nonetheless, Blackwells has chosen to respond with a public campaign and an attempt to take effective control of the company,” Supervalu said.

Supervalu also said it was “committed to board refreshment” and would consider Blackwells’ candidates.

The company has not yet filed definitive proxy materials or set a date for its annual meeting.