In a bid to strengthen its supermarket business in the mid-Atlantic, Richfood Holdings Inc., which owns Metro Food Markets, has agreed to purchase Dart Group Corp. for $160 a share in cash, or about $207 million, the company said yesterday.
Richmond, Va.,-based Richfood, a grocery wholesaler that has expanded into retailing, is buying Dart, a Landover-based retail holding company, primarily to acquire Shoppers Food Warehouse, a chain of 37 discount supermarkets in Maryland and Virginia and the third largest chain in metropolitan Washington, with stores in Anne Arundel, Charles, Frederick, Montgomery and Prince George's counties.
"We think very highly of that chain," said John Belknap, executive vice president and chief financial officer of Richfood. "It has a strong market position in the greater Washington, D.C., market. There are opportunities to improve that business and to expand it. There are strategic advantages and synergies by having Richfood the owner."
The sale would give the company about 100 grocery stores with sales of $2 billion, bumping it ahead of Safeway to the No. 2 spot behind Giant Food Inc., according to the Columbia-based trade journal Food World.
"They've clearly shifted gears, and they're clearly in the retail business full-time," said Jeff Metzger, publisher of Food World.
"They're buying to preserve their customer base," said Ken Gassman, a retail analyst with Richmond-based Davenport & Co. "It's a good deal for Richfood."
Richfood, the largest wholesale food distributor in the mid-Atlantic region, also owns Metro, which has 17 stores, and last month completed the purchase of Farm Fresh Inc., a bankrupt supermarket chain based in Norfolk, Va. It has total annual sales of $3.5 billion.
After the acquisition, Belknap said, Richfood would sell off Dart's nonfood holdings, including Total Beverage, a discount beverage retailer, as well as its 67-percent stake in Trak Auto, a publicly traded retailer of auto parts, and 52-percent interest in Crown Books, which also is publicly traded. Dart's portion of Trak Auto and Crown is valued at about $60 million.
Dart's board of directors unanimously approved the agreement and recommended that Dart shareholders accept the offer. Dart stock closed yesterday at $163.50 a share, up $23.50.
"I'm very gratified to have entered this transaction," Richard Stone, Dart's chairman, said yesterday. "It maximized the value that we can return to our shareholders." Richfood will initiate a cash offer within five business days. Shares not purchased under the tender offer will be acquired in a subsequent merger, at the same prices, after completion of the offer, Belknap said. First Union National Bank has committed to financing the deal, Richfood said.
Richfood plans no mergers among its supermarket chains, Belknap said.
"We'll have three distinct chains, Metro in Baltimore, now Shoppers, and Farm Fresh in Tidewater," he said. "It's important to us those operations maintain their personalities. They're local chains, and we're not about to change that. They all have things they do very well in their particular markets.
Metro, based in Catonsville, is in the midst of an expansion in the Baltimore region, where it plans new stores in Timonium, Ellicott City, Glen Burnie and Columbia. For Richfood competitors such as Giant and Safeway, the planned acquisition means even stiffer competition from stores that are better run and will grow in number, said Metzger.
"What Giant and Safeway can expect is a better-run ship in the future," he said. "For the last several years, Shoppers has been in a tumultuous state," amid questions about whether it would be sold.