JP buys sizable part of Rotelle Food distributor paying $6.2 million for Richfoods unit

November 28, 1995|By Ellen James Martin | Ellen James Martin,SUN STAFF

JP Foodservice Inc., the Columbia-based institutional food distributor that has been charting an aggressive growth strategy, announced yesterday that it has bought most of Rotelle Inc., a Pennsylvania company in the same business.

The $6.2 million acquisition of Rotelle, a subsidiary of Richfoods Inc. of Richmond, Va., is part of a rapid expansion program for the cash-rich JP, which paid off much of its heavy debt load when it went public in November 1994.

"This company is just poised for growth. We've established ourselves as one of the top companies in the industry, in terms of profitability," said Lewis Hay III, JP's chief financial officer.

With $37 million in net institutional sales, Rotelle supplies food products to such institutional customers as restaurants, colleges and nursing homes, primarily in the Philadelphia and Allentown, Pa., regions, and in eastern New Jersey, Mr. Hay said.

Rotelle is based near Philadelphia.

"There's beauty in the growth of JP right now," said Ronald Morrow, who tracks JP for the Rodman & Renshaw brokerage in New York. He said Americans are eating more often at restaurants, which is a leading reason for the growth of the institutional food distribution business.

Among market leaders, JP Foodservice Inc. is matched only by Sysco Corp., the Houston-based industry leader, in terms of the pace of its growth, according to Mr. Morrow.

"JP is the only other game in town besides Sysco," the analyst said.

The Rotelle sale will help Richfoods concentrate on its broader business of food distribution, including its heavy focus on supermarket customers, said Donald D. Bennett, Richfoods' chairman and chief executive. Richfoods has kept the part of Rotelle that supplies retail grocery stores, he said.

Also this year, JP Foodservice bought Tri River Foods Inc., a food service distributor in Bethel Park, Pa. Terms of the stock and cash deal for the small company, with $16 million in annual sales, were not disclosed.

"They have the currency in their stock to make acquisitions, and that's what we analysts want JP to do," Mr. Morrow said.

Mr. Morrow noted that JP's stock has done well since last fall, when it was trading on the NASDAQ for around $12 a share. Yesterday it closed unchanged at $15.625.

Also yesterday, JP announced it has obtained exclusive distribution rights for the el Pasado line of Mexican food products -- including corn and flour tortillas, salsa, cheeses, meats, sauces and seasonings, and beans.

In its first quarter ended Sept. 30, JP reported revenue of $310.8 million, compared with $279.8 for the same quarter last year.

Net income reached $3.4 million for the quarter, compared with a $638,000 loss in the period last year.

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