British supermarket chain J. Sainsbury PLC said today that it has taken a big ownership stake in Giant Food Inc., the family-controlled company that dominates the Washington-Baltimore grocery market.
Sainsbury, Britain's No. 1 grocer, will get three seats on Giant's seven-member board of directors. But its acquisition of half of Giant's voting stock isn't expected substantially to change Giant's strategy of conservative growth and careful nurturing of its hometown markets.
Kurt Funderburg, an analyst with Baltimore-based investment house Ferris Baker Watts Inc., sees Sainsbury and Giant working "for now, in a quiet, cooperative partnership."
The deal does move Giant away from decades of family control and into the world of multinational ownership, a route taken by other U.S. grocers in recent years.
For example, another European company owns a big stakes in Salisbury, N.C.-based Food Lion Inc.
Sainsbury is buying half of Giant's 250,000 voting shares for $325 million from descendants of Jacob Lehrman, who founded the chain in the 1930s with Nehemiah Cohen.
Israel Cohen, 82, Nehemiah's son, still owns the other 125,000 Giant voting shares. With the four board seats that come with his stake, Mr. Cohen retains control of the company. Giant also has nonvoting, publicly traded stock. Sainsbury's purchase gives it 16 percent of Giant's total equity.
Analysts said it's possible that Sainsbury eventually could acquire Mr. Cohen's stock, too, giving it 100 percent control. In any case, Sainsbury's purchase is expected to yield new blood at Giant as well as capital for expansions. Giant is in the process of an ambitious, but gradual, move into the Philadelphia region.
Sainsbury might eventually speed Giant's growth, Mr. Funderburg said, both in Philadelphia and elsewhere.
"They might expand south now; they might expand west, in addition to going to Philadelphia," he said.
Giant operates 160 stores, most of them in the Baltimore-Washington market. Last year it controlled 39 percent of supermarket sales in that region, according to Food World, a trade newspaper.