Acquisition of Associated Grocers of Florida, Inc. and Unified Grocers, Inc.

On December 8, 2017, we completed the acquisition of Associated Grocers of Florida, Inc. (“AG Florida”) pursuant to the terms of an Agreement and Plan of Merger dated October 17, 2017 (the “AG Merger Agreement”) by and among Supervalu, a then wholly owned subsidiary of Supervalu (“AG Merger Sub”), and AG Florida. AG Florida was a retailer-owned cooperative. AG Florida distributes full lines of grocery and general merchandise to independent retailers, primarily in South Florida, the Caribbean, Central and South America and Asia. The transaction was valued at $193, comprised of $131 in cash for 100 percent of the outstanding stock of AG Florida plus the assumption and payoff of AG Florida’s net debt of $62 at closing. We incurred merger and integration costs of $3 in the first quarter of fiscal 2019 related to the AG Florida acquisition.

On June 23, 2017, we completed the acquisition of Unified Grocers, Inc. (“Unified”) pursuant to the terms of an Agreement and Plan of Merger dated April 10, 2017 (the “Merger Agreement”) by and among Supervalu, West Acquisition Corporation, a then wholly owned subsidiary of Supervalu (“Merger Sub”), and Unified. The transaction was valued at $390, comprised of $114 in cash for 100 percent of the outstanding stock of Unified plus the assumption and payoff of Unified’s net debt of $276 at closing. We incurred merger and integration costs of $3 in the first quarter of fiscal 2019 related to the Unified acquisition. The purchase price allocation for Unified was completed in the first quarter of fiscal 2019.

The table immediately below summarizes the preliminary fair values assigned to AG Florida’s acquired net assets. As of June 16, 2018, the fair value allocation of the acquisition was preliminary and will be finalized when the valuation is completed. There can be no assurance that such finalization will not result in material changes from the preliminary purchase price allocation. Our estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date), as we finalize the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisition. The primary areas of the purchase price allocations that are not yet finalized relate to real property, identifiable intangible assets, goodwill, income taxes and deferred taxes.



	As Originally Reported			As Revised
Cash and cash equivalents	$	1		$	1
Accounts receivable	49			49
Inventories	48			48
Other current assets	4			4
Property, plant and equipment	84			94
Goodwill	44			39
Intangible assets	52			48
Deferred tax assets	(28		)	(29		)
Other assets	4			4
Accounts payable	(53		)	(53		)
Other current liabilities	(13		)	(13		)
Long-term debt and capital lease obligations	(60		)	(60		)
Other liabilities assumed	(1		)	(1		)
Total fair value of net assets acquired	131			131
Assumed obligations to make patronage payments to member-owners	5			5
Less cash acquired	(1		)	(1		)
Total consideration for acquisition, less cash acquired	$	135		$	135

Recognized goodwill is primarily attributable to expected synergies from combining operations, as well as intangible assets that do not qualify for separate recognition.

As of June 16, 2018, we recognized the following finite-lived intangible assets of AG Florida:



	Estimated Useful Life (in years)	Amounts Acquired
Customer relationships and supply agreements	15 years	$	43
Favorable operating leases	2-5 years	5
Total AG Florida finite-lived intangibles acquired		$	48

Combined Results

The following unaudited pro forma condensed consolidated financial results of operations are presented as if the AG Florida and Unified acquisitions were consummated on February 26, 2017, the beginning of the comparable prior annual reporting period:



	June 17, 2017 (16 weeks)⁽¹⁾
Net sales	$	4,869
Net earnings from continuing operations attributable to SUPERVALU INC.	$	5
Basic net earnings from continuing operations per share attributable to SUPERVALU INC.	$	0.14
Diluted net earnings from continuing operations per share attributable to SUPERVALU INC.	$	0.14

(1)

The unaudited pro forma financial information is based on Unified’s and AG Florida’s historical reporting periods. The results reflect Unified’s and AG Florida’s 16 weeks ended June 17, 2017 and May 6, 2017, respectively. Adjustments have been made to remove historical transaction costs from Unified’s and AG Florida’s historical income statements. No adjustments have been made for direct and indirect merger and integration costs that were incurred subsequent to the respective acquisition dates of Unified and AG Florida.

As required by accounting principles generally accepted in the United States, these unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined companies would have been had the acquisitions occurred at the beginning of the period being presented, nor are they indicative of future results of operations.