Supervalu Surges on This Speculation

Retail and wholesale food store operator Supervalu (NYSE:SVU) spiked as much as over 40 percent on October 22. The company has seen its share value decline over 70 percent this year to date through the end of last week, struggling to turn itself around in the wake of recession. However, shares are up on speculation of a buyout, with JPMorgan’s debt analyst Carla Casella putting a 50 percent likelihood on a LBO.

Supervalu has had to face competition from retail giants like Wal-Mart (NYSE:WMT) that attract more attention as destination shopping centers. Low-cost, low-margin retailer Costco (NASDAQ:COST) has also done well fighting against tough economic times and tighter budgets. Both chains offer consumers low cost and high convenience. Meanwhile, store operators like Supervalu and Safeway (NYSE:SWY) bleed share value.

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It’s too early to toll the bells for Safeway and Supervalu. Both companies posted over $35 billion in revenue over the past twelve months. Supervalu has lost almost $5 per share, while Safeway’s trailing twelve month EPS is $1.75.

According to Basics Media, Supervalu reported that, “The Company has received a number of indications of interest and is in active dialogue with several parties. There can be no assurance that this process will result in any transaction or any change in the Company’s overall structure or its business model.”

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