United Natural Foods has filed a lawsuit against its adviser in the Supervalu acquisition, alleging Goldman Sachs cost it millions by arranging financing that benefited the bank over the company.
UNFI acquired Supervalu last year in a $2.9 billion combination of leading grocery wholesalers largely funded with debt arranged by Goldman Sachs.
Among its allegations of misconduct, UNFI’s suit alleges that Goldman demanded Supervalu be added as a co-borrower on a term loan as part of a “quid pro quo” between the bank and credit-default swap (CDS) holders, spurring an “artificial and significant spike” in the value of CDS protection contracts. UNFI also alleges that Goldman twice misappropriated fees associated with the financing and took other actions that increased UNFI’s cost of borrowing so as to enrich the bank.
“While positioning itself as UNFI’s trusted adviser on the one hand and its counter-party lender on the other, Goldman Sachs consolidated its command over all aspects of the transaction in order to extract millions in unjustifiable interest, fees and other damages suffered by the company and its shareholders,” Providence, R.I.-based UNFI said in a statement.
A spokeswoman for Goldman Sachs told WGB that the bank “believes that these claims are entirely without merit. We intend to vigorously defend ourselves against these accusations.”
UNFI has been steadfastly defending the strategic rationale for the deal, which was announced in July after a spirited auction process, but the deal has met with a lukewarm reception from investors, particularly after quarterly earnings news that disappointed investors. Debt markets also deteriorated somewhat while the funding was taking place, sources said.
Jill Sutton, UNFI’s chief legal officer and general counsel, added: “We believe a review of the case’s details and facts shows that when the defendants had to choose between UNFI’s best interests and their own profits, they opted to put their financial motives first.”