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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Harshu Vyas who wrote (76268)	10/1/2024 2:48:46 PM
From: E_K_S	1 Recommendation Recommended By Harshu Vyas Read Replies (1) \| Respond to of 78476

Re: UNFI Have you noticed what the Price to tangible BV for UNFI is? It's about 1.01x Price to Tangible book You may not recall the history of how this acquisition by UNFI & SUPERVALU occurred. United Natural Foods, Inc. (UNFI) made a significant acquisition of SUPERVALU INC. on October 22, 2018. The deal was valued at approximately $2.9 billion, which included the assumption of outstanding debt and liabilities Tangible Assets Acquired The acquisition of SUPERVALU allowed UNFI to enhance its distribution capabilities significantly. Key tangible assets included: Distribution Centers: UNFI gained access to SUPERVALU's extensive network of distribution centers, which expanded its logistical reach across North America. Product Range: The merger provided UNFI with a broader product portfolio, including over 110,000 products that could be distributed to more than 40,000 customer locations in the U.S. and Canada 3 . Retail Outlets: The acquisition included SUPERVALU's retail operations, which encompassed various grocery stores and brands, enhancing UNFI's market presence. ------------------------------------------------------------------------------------- It was these distribution centers that allowed UNFI to expand their distribution foot print across the Mid West. Distribution Centers Obtained The acquisition provided UNFI with access to more than 30 distribution centers across the United States. These centers are strategically located to facilitate efficient logistics and supply chain management, enabling UNFI to serve a broader customer base effectively. --------------------------------------------------------------- Since 2018 UNFI has been consolidating these acquired assets, writing down Goodwill, reducing debt and working on implementing next generation logistic systems. Key Next-Generation Logistic Systems Symbotic A.I.-Powered Robotics Automation: UNFI has entered into a commercial agreement with Symbotic to implement an A.I.-powered robotics automation system across five distribution centers over four years. The first installation is at the Centralia, Washington distribution center, with plans for additional centers, including a new facility in Manchester, Pennsylvania. This system provides robotic case picking capabilities, enhancing operational efficiency, improving order accuracy, and better organizing products for delivery to retail locations 1 2 3 . Systems Application Enterprises (SAE) Technology: UNFI is deploying SAE scanning technology across 18 distribution centers to modernize its logistics operations. This technology is designed to streamline processes and improve inventory management, contributing to better overall operational performance 1 . Warehouse Management Systems (WMS): The integration of advanced warehouse management systems has been part of UNFI's strategy to optimize inventory control and streamline order fulfillment processes. These systems enhance visibility and tracking throughout the supply chain 4 . Intermodal Transportation Solutions: UNFI has expanded its use of intermodal transportation, significantly reducing its carbon footprint while improving logistics efficiency. By leveraging rail alongside truck transport, UNFI has achieved substantial cost savings and enhanced service reliability for both dry and temperature-controlled shipments 4 . -------------------------------------------------------- It's been 5 years of hard work and it appears it may be paying off. I have followed this story since 2018. TGT was interested in these warehouse assets but UNFI got to them first. Do you know anything about Symbotic Inc (SYM). Wall Mart is their largest customer. I used to own SYM. Symbotic Inc. is an automation technology reimagining the supply chain with its end-to-end, A.I.-powered robotic and software platform. I was surprised that UNFI choose them early last year to design and install one of their automated warehouse systems for them. Supper efficient too. That was one of the things this new management did. What could one of the EXIT Strategies be for UNFI (and one the CEO perhaps has in mind)? There is an outside chance that UNFI is acquired by Amazon to be their direct to consumer grocery distributor/supplier. Their largest customer now is Whole Foods. United Natural Foods, Inc. (UNFI) extended its distribution contract with Whole Foods Market on May 21, 2024. The new agreement will last until May 2032, replacing the previous contract, which was set to expire in September 2027.Terms of the Agreement Duration: The extension is an eight-year agreement, providing UNFI with a longer commitment from Whole Foods. Role: UNFI continues to serve as the primary distributor for Whole Foods, which is an affiliate of Amazon.com, Inc. Strategic Importance: This partnership is crucial for UNFI as it enhances their position in the market and supports their efforts to diversify distribution partnerships beyond Whole Foods. Context and SignificanceThe extension reflects growing confidence between UNFI and Whole Foods, especially following a previous two-year extension in 2021. This long-term deal is seen as a stabilizing factor for UNFI amid challenges in profitability and integration efforts following its acquisition of Supervalu in 2018. The partnership allows both companies to focus on meeting the evolving needs of consumers while strengthening their supply chain capabilities 1 2 4 . Amazon, as the parent company of Whole Foods Market, plays a significant role in the distribution contract and negotiations between United Natural Foods, Inc. (UNFI) and Whole Foods.Involvement of Amazon in the Contract Ownership Influence: Whole Foods Market is a wholly-owned subsidiary of Amazon. This ownership means that Amazon has a vested interest in the terms and execution of the distribution agreement with UNFI. The strategic decisions made by Whole Foods, including distribution partnerships, are likely influenced by Amazon's broader goals in the grocery sector. Contract Extension: The latest extension of the distribution partnership, announced on May 21, 2024, extends their agreement until May 2032. This decision reflects a continued commitment from both UNFI and Whole Foods to collaborate effectively in meeting consumer demands for high-quality products. The partnership is described as longstanding and essential for both companies' supply chain strategies 2 3 5 . Negotiation Dynamics: Given Amazon's significant market power and its competitive position in the grocery sector, its involvement likely adds a layer of scrutiny and negotiation leverage during discussions about contract terms. The renewal of this contract comes at a time when UNFI has faced challenges, making the partnership's continuation crucial for its stability. Market Context: The context of Amazon's acquisition of Whole Foods raised initial doubts about UNFI's future as Whole Foods could potentially shift its distribution strategy. However, the successful renewal of the contract indicates that Amazon recognized the value UNFI brings to its supply chain operations 2 6 . In summary, while specific details about Amazon's direct role in negotiations are not publicly disclosed, its ownership of Whole Foods undoubtedly influences the terms and dynamics of the distribution contract with UNFI. ----------------------------------------------------- So as a Value Investor, to own this at 1.01x tangible book is a bargain. I have been wrong many time and may again be wrong on this deal but the risk reward is good.