Supervalu had its biggest gain in more than three decades after an economist upgraded the companys bonds on the possibility of a buyout.
The shares advanced to $3.17, a 45 percent advance, at the close in New York for the biggest gain since at least 1980. The Eden Prairie, Minn.,-based grocer, which owns all Albertsons stores in Idaho, has declined 61 percent this year.
JPMorgans Carla Casella, who raised the companys bonds to a neutral rating from underweight, said the chance of a buyout is 50 percent.
Much of Supervalus $6.31 billion of debt is low-cost and wouldnt need to be refinanced in the case of a purchase, Casella said. The company also owns real estate that could be used to keep the cost of financing the buyout relatively low, she said.
Supervalu has been pursuing a new direction after losing more than $2.5 billion in its previous two fiscal years, hurt by competition from big-box discounters and costs to operate stores. Last week, the company said it has received a number of indications of interest and is in active dialogue with several parties.
The company has attracted interest from billionaire Ronald Burkle and buyout firms KKR and TPG Capital, people with knowledge of the matter said earlier this month. Cerberus Capital Management also has looked at some of Supervalus assets, said one person. Burkle and the private-equity firms are looking at parts of Supervalu rather than the whole, said the sources.
The third-largest U.S. grocery chain disclosed in July that it was working with Goldman Sachs and Greenhill & Co. to review options. Spartan Stores, a retailer based in Grand Rapids, Mich., has shown interest in some of Supervalus stores in the Midwest.
Supervalu has 1,099 traditional retail stores, under names such as Jewel-Osco and Albertsons, and has 1,341 Save-A-Lot locations.
Kroger, the parent company of Fred Meyer, is the largest U.S. grocery store chain, followed by Safeway.