Family Fare’s parent part of mega-merger

Family Fare’s parent company, Grand Rapids-based Spartan Stores, has announced a merger with another Midwest grocery wholesale distributor and retailer.

The combined company is expected to achieve $50 million in annual savings by its third fiscal year. The all-stock merger is valued at $1.3 billion, including existing net debt at each company.

Details of the merger with Nash Finch of Minnesota were still being finalized.

“We can tell you that you will experience no changes in your local Family Fare” at 56151 M-51 South, Spartan Stores President and CEO Dennis Eidson said in a prepared statement about continuing promotions offered through the yes rewards program, including weekly specials, as well as pharmacy services and fuel rewards. Family Fare will remain the name.

“There will not be any store associate changes with this merger,” Eidson said, “so you will find your favorite meat cutter, cake decorator or cashier at your local Family Fare.”

Glenn Jankowski, Dowagiac store director, was on vacation Tuesday and not available for comment.

Spartan was the nation’s ninth-largest grocery distributor with 1.4 million square feet of warehouse, distribution and office space.

The company distributes more than 40,000 private and national brand products to 390 independent grocery locations in Michigan, Indiana and Ohio and to 102 corporate-owned stores in Michigan, including Family Fare Supermarkets.

The combination creates an entity with annual sales of $7.5 billion.

Sysco Corp., a publicly traded company in Houston, posts annual sales of about $44 billion, followed by US Foods of Chicago, with around $20 billion.

Big-box retailers such as Target and Wal-Mart also entered the grocery business with distribution networks.

Spartan and Nash Finch will have 22 distribution centers in 37 states, 177 retail stores and be the leading distributor to military commissaries and exchanges in the United States.

Under terms of the transaction, unanimously approved by the boards of directors of both companies, Nash Finch shareholders receive a fixed ratio of 1.2 shares of Spartan Stores common stock for each share of Nash Finch common stock they own.

Upon closing, expected by the end of 2013, Spartan Stores shareholders will own approximately 57.7 percent of the equity of the combined company, Nash Finch shareholders approximately 42.3 percent.

“This transformational transaction provides a unique opportunity to bring together Spartan Stores’ grocery distribution and retail operations in Michigan, Indiana and Ohio with Nash Finch’s leading position in grocery distribution to military commissaries and exchanges and its complimentary wholesale grocery network throughout the U.S.,” Eidson said.

“By combining our resources, expertise and talent, we will become a stronger and more efficient organization with an enhanced ability to leverage our size, geographic reach and hybrid business model to better compete in the evolving grocery industry.

“In addition,” Eidson said, “the scale of the combined company will provide efficiencies and savings in purchasing and strengthen our ability to serve our independent retail customers, military commissaries and exchanges and retail consumers. At the same time, the combined company will have greater financial flexibility to drive growth, which will provide opportunities for many employees and deliver increased value to shareholders.”

“This transaction is consistent with our vision to become the largest and most admired food distributor in the U.S.,” said Alec Covington, Nash Finch president and CEO. “The complementary operations and outstanding strategic fit of these two companies creates significant value for both companies’ shareholders. Our shared vision to provide best-in-class services to our wholesale customers and attractive formats for our retail consumers, as well as our continued commitment to serving our nation’s military heroes and their families, at home and abroad, creates a powerful platform for growth over the long term.”

Eidson will serve and president and CEO of the combined company, with Covington remaining in an advisory role to insure a smooth transition.

The combined company will retain a presence in Minneapolis and Grand Rapids. Nash Finch’s military business remains based in Norfolk, Va.

Craig Sturken, Spartan chairman, will chair the board of directors of the combined company. It will be comprised of 12 members — seven designated by Spartan Stores and five designated by Nash Finch, which started as a candy and tobacco store in Devil’s Lake, N.D., in 1885 by Fred Nash, son of Vermont farmers.

It moved to Minneapolis in 1919 and grew into a Fortune 500 grocery store and warehouse empire employing more than 8,000 people.

The transaction is subject to customary regulatory approvals and closing conditions, including shareholder assent. Shares of both companies surged at the news.

Nash Finch, which lost $93 million last year, jumped $6.84, or 27 percent, to $32.27 in pre-market trading Monday, while Spartan Stores shares rose $4.30, or 20.3 percent, to $25.50.

 

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