Supervalu begins tender offer for subsidiary's 7.25% HITS

By Laura Lutz

Des Moines, Oct. 23 - Supervalu Inc. launched a tender offer for all of its outstanding 7.25% Hybrid Income Term Security units held in the form of corporate units of its wholly owned subsidiary New Albertson's, Inc.

The company is offering to pay $25.22 in cash for each unit. The company will also pay the scheduled quarterly contract adjustment payment and interest payment, which together total $0.453 per unit, on Nov. 16.

New Albertson's is expected to seek to delist any remaining corporate units from the New York Stock Exchange following settlement of the tender offer.

The offer will expire at 5 p.m. ET on Nov. 20.

As of Oct. 20, 45,970,800 corporate units were outstanding. Each unit consists of a contract to purchase for $25 cash a fraction of a share of Supervalu's common stock on May 16, 2007 and a 2.5% ownership interest in one of the senior notes that is pledged to secure the holder's obligations under the purchase contract.

Supervalu is conducting the offer to reduce its amount of debt maturing in 2009 and avoid practical considerations and fees related to the remarketing process for the senior notes due 2009 associated with the corporate units.

At the same time, Supervalu announced a $500 million issue of unsecured senior notes due 2014, which will fund the tender offer.

Settlement of the offer is subject to conditions including the successful completion of the issue of senior notes for at least $500 million. The offering of notes is not conditioned on settlement of the tender offer.

Merrill Lynch & Co. (888 654-8637 or collect 212 583-8206), Banc of America Securities LLC (800 654-1666 or collect 212 583-8206) and Credit Suisse Securities (USA) LLC (800 820-1653 or collect 212 325-2547) are the dealer managers for the tender offer. Innisfree M&A Inc. (877 800-5186) is the information agent, and U.S. Bank Trust NA is the tender agent.

Supervalu is a supermarket operator based in Eden Prairie, Minn.

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