Grocery Outlet up for sale for more than $1 billion, say sources-Reuters

(Reuters) – Discount supermarket chain Grocery Outlet is exploring a sale that is expected to value the bargain retailer at more than $1 billion, according to people familiar with the matter.

Grocery Outlet’s private-equity owner, Berkshire Partners LLC, has hired Barclays and Goldman Sachs to run a sale process for the Berkeley, California-based food market chain, the people said on Monday.

Grocery Outlet bets on U.S. consumer frugality in lean economic times, offering about half off traditional supermarket prices by selling manufacturers’ excess inventory.

All the people asked not to be named because the matter is not public. Representatives for Grocery Outlet and Goldman Sachs did not immediately respond to requests for comment. Berkshire Partners and Barclays declined to comment.

Supermarket deals have been on the upswing, with Kroger Co purchasing Harris Teeter last year and private-equity firm Cerberus Capital Management LP striking a $9 billion deal for Safeway Inc.

Grocery Outlet has about $100 million in earnings before interest, tax, depreciation and amortization and could sell for more than 10 times that figure, some of the people said.

Grocery Outlet has more than 180 stores in Pennsylvania and several states in the Western United States including California, Washington and Oregon.

Founded by Jim Read in San Francisco in 1946, the chain initially sold government-surplus canned goods. Read’s grandson, MacGregor Read, is currently co-CEO of the company.

In the past decade, Grocery Outlet has evolved into carrying a full line of groceries, including fresh items including produce, meat and milk. Organic goods and beer and wine are fast-growing categories within the retailer.