Item 1.01. Entry into a Material Definitive Agreement.
The information set forth in the Introductory Note is incorporated herein by reference.
In connection with the completion of the Sale, on December 5, 2016, Supervalu and Save-A-Lot entered into a Services Agreement (the “
Services Agreement
”) whereby Supervalu will provide certain professional services to Save-A-Lot for a term of five years, on the terms and subject to the conditions set forth therein.
Pursuant to the Services Agreement, Supervalu will provide Save-A-Lot various technical, human resources, finance and other operational services. Save-A-Lot paid Supervalu $30 million upon entry into the Services Agreement, which will be credited against fees due under the Services Agreement. The initial annual base charge under the Services Agreement is $30 million, subject to adjustments. In addition to these services, Save-A-Lot can request new services through the “change control” procedures set forth in the Services Agreement, and Supervalu may also agree to conduct non-recurring projects for Save-A-Lot pursuant to project orders. The services may be used by Save-A-Lot and its subsidiaries only in connection with the Save-A-Lot hard discount business.
Save-A-Lot may terminate the Services Agreement in the event of Supervalu’s material breach, if Supervalu breaches its non-compete obligations under the Merger Agreement, if Supervalu is acquired by a third party that engages in a Competing Business (as defined in the Merger Agreement) or in the event of Supervalu’s bankruptcy or insolvency, in each case, subject to certain limitations set forth in the Services Agreement. In addition, Save-A-Lot may terminate certain services or service categories if Supervalu commits a breach that is material to the service category or if Supervalu fails to meet certain minimum specified service levels, in each case, subject to certain limitations set forth in the Services Agreement. Supervalu may terminate the Services Agreement in the event of Save-A-Lot’s material breach, for Save-A-Lot’s failure to make timely payment, for certain legal or regulatory changes and in the event of Save-A-Lot’s bankruptcy or insolvency, in each case, subject to certain limitations set forth in the Services Agreement. The Services Agreement generally requires each party to indemnify the other party against third-party claims arising out of the performance of or the provision or receipt of services under the Services Agreement.
The foregoing description of the Services Agreement and certain terms of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Services Agreement and the Merger Agreement, each of which are incorporated herein by reference. The Services Agreement is filed as Exhibit 10.1 hereto, and the Merger Agreement was filed as Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 17, 2016. Supervalu has also applied to the Securities and Exchange Commission (the “
SEC
”) for confidential treatment of certain portions of Exhibit 10.1. Omitted material for which confidential treatment has been requested has been separately filed with the SEC.
Item 2.01. Completion of Acquisition or Disposition of Assets.
The information set forth in the Introductory Note is incorporated herein by reference.
On December 5, 2016, Supervalu sold its Save-A-Lot business to the Purchaser for a purchase price of $1.365 billion in cash, subject to customary closing adjustments. The Sale was effected pursuant to the terms of the Merger Agreement, whereby Merger Sub merged with and into Save-A-Lot (the “
Merger
”), with Save-A-Lot surviving the Merger as a wholly owned subsidiary of Purchaser.
The foregoing description of the Sale, the Merger and the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is incorporated herein by reference. The Merger Agreement was filed as Exhibit 2.1 to Supervalu’s Current Report on Form 8-K filed with the SEC on October 17, 2016.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of Supervalu and the related notes thereto giving effect to the Sale are attached hereto as Exhibit 99.2.
Item 2.04. Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The information set forth in the Introductory Note is incorporated herein by reference.
In connection with the completion of the Sale, on December 5, 2016, Supervalu prepaid $750 million of outstanding loans under its existing senior secured term loan pursuant to and as required by the terms of the Second Amended and Restated Credit Agreement, dated as of January 31, 2014 (as amended, the “
Credit Agreement
”), among Supervalu, as borrower, the subsidiaries of the Company named as guarantors therein, Goldman Sachs Bank USA, as administrative agent and as collateral agent, and the lenders from time to time party thereto, because the Sale constitutes a “Moran Sale” (as defined in the Credit Agreement). Pursuant to the Credit Agreement, the Company is required within 10 days of completion of the Sale to make an additional prepayment of outstanding loans under the Credit Agreement in an amount currently estimated to be $75 million, which represents 50% of the Net Cash Proceeds (as defined in the Credit Agreement) in excess of $750 million up to an aggregate amount that would cause the Company’s Total Secured Leverage Ratio (as defined in the Credit Agreement), on a pro forma basis after giving effect to such prepayment, to be no higher than 1.50:1.00.
In connection with the Sale, the Company entered into an agreement with the Pension Benefit Guarantee Corporation (“
PBGC
”) under which, among other things, the Company has agreed to make certain contributions to its qualified pension plan in excess of any required minimum contributions and to repay any outstanding balance under the Company’s $1,000 million asset-based revolving ABL credit facility at the time of the Sale.
The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the Credit Agreement, which is incorporated herein by reference. The Credit Agreement was filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 2, 2014, and the Third Amendment and Consent Agreement to the Credit Agreement was filed as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on May 23, 2016.
Item 7.01. Regulation FD Disclosure.
Exhibit 99.3 to this Current Report on Form 8-K provides supplemental consolidated and segment financial information for the year-to-date periods (28 weeks) ended September 10, 2016 and September 12, 2015, and for Supervalu’s fiscal year ended February 27, 2016 that reflects the recast segment presentation described in Item 9.01 hereof and is incorporated by reference in this Item 7.01. The information in this Item 7.01, including Exhibit 99.3, shall not be deemed “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing.