retail news in context, analysis with attitude

The Wall Street Journal reports that Supervalu's investors yesterday voted to reject a proposal that would have lowered the number of shareholder votes necessary to approve a merger or sale of all or part of the company - a vote that has a lot of meaning for a company that has declared itself on the sales block because of poor sales and earnings, a decision that caused the stock to drop more than 50 percent in one day.

In addition, Reuters reports that Supervalu CEO Craig Herkert says that "bankruptcy is not among the options being weighed at the company hampered by debt from its $12.4 billion acquisition of more than 1,100 Albertsons stores in 2006."

According to the Journal story, Supervalu's board wanted to change the company's rules so that only two-thirds of shareholders needed to approve a sale, down from three-quarters.

The Journal notes that "requiring a higher percentage of shareholder votes essentially puts more control in the hands of the board of directors, because potential buyers will be forced to negotiate pricing with the board, which could be beneficial to shareholders. However, it also gives the board greater ability to reject proposed acquisitions and refuse to sell, which could be detrimental to shareholders."

Among the players likely to be interested in all or part of the company, according to the Journal: C&S Wholesale Grocers, Kroger Co., Cerberus Capital Management and Kohlberg Kravis Roberts & Co.
KC's View:
Once again, we have plenty of emails today from folks weighing in on the Supervalu situation. If I can sum them up, there seems to be a general consensus that the folks at the top there are trying to manage a bad situation, rather than lead the company in a way that stresses a sustainable and innovative future. It may be that it is too late to do anything other than try to manage their way out of a death spiral ... but if that is the case, then it seems fairly clear what the inevitable ending will be.