M&A To Rise, Supervalu Seen As Target

Grocery store dealmaking, already up one-third this year, is expected to increase as regional supermarkets seek greater size and heft to compete against non-union, lower-cost rivals.

The goal has been to help companies lower their purchasing, marketing, and distribution costs as they increase in size. Cutting costs and gaining size should improve profits in the face of competition from non-union warehouse clubs, specialty grocers and mass merchandisers such as Costco Wholesale Corp (COST.O), Whole Foods Market Inc (WFM.O) Wal-Mart Stores Inc (WMT.N) and Target Corp (TGT.N).

Dealmaking in the grocery sector has jumped 34.2 percent so far this year to $2.6 billion. That marks the busiest year-to-date since 2007, according to Thomson Reuters data.

"The next few months will be busy because things are busy now. Consolidation of grocers of various forms and sizes is almost certain to continue because it's a microeconomic imperative, given the growth of supercenters, club stores and various non-union specialty formats," said Scott Moses, managing director and head of food, drug and specialty retail investment banking at Sagent Advisors.

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