Richfood now owned by Supervalu

Metro markets' owner fetches $1.5 billion as deal is completed

Grocery industry

September 01, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Supervalu Inc. completed yesterday its acquisition of Richfood Holdings Inc., the owner of Catonsville-based Metro Food Markets, for $1.5 billion in stock, cash and assumed debt.

With the addition of the $4 billion food wholesaler and retailer based in Richmond, Va., Supervalu strengthens its position as the nation's biggest grocery distributor and becomes the 10th-largest supermarket operator in the United States.

The purchase is expected to increase the Minneapolis company's retail store sales by more than 35 percent, to about $8 billion, with total annual sales of $25 billion.

Besides obtaining Metro Food, the Baltimore area's second-largest grocery chain, Supervalu also acquired Richfood's Shoppers Food Warehouse, the third-largest grocery chain in the Washington market, and Farm Fresh, the No. 2 chain in Virginia's Hampton Roads area. Supervalu will fold Richfood's distribution operations into its own.

The companies closed the sale yesterday after Richfood shareholders approved the deal. Supervalu's stock closed at $22.6875, down 18.75 cents.

"This reinforces our strategic move to become more and more of a retailer and recognized as a leading retailer as well as a wholesaler," said Bill Bolton, president and chief operating officer of Supervalu's retail companies.

Supervalu has no plans to merge any of the Richfood chains, Bolton said yesterday.

The company intends to share ideas among all of its chains -- for instance, incorporating Shopper Food Warehouses' seafood presentation into other chains, Bolton said.

"In the development of the deal, we talked to the management of all three and are very pleased with the direction and plans they've put in place," Bolton said. "With our size, we should be able to provide more capital for future growth."

For Metro Foods, that means continuing an aggressive expansion that includes opening five new stores in the next five months, on Reisterstown Road, in Hunt Valley and on Padonia Road, all in Baltimore County; on Ritchie Highway in Brooklyn Park; and on Quarterfield Road in Anne Arundel County.

Metro also plans four additional stores next year, in Ellicott City, at Mondawmin Mall and at two undisclosed locations, said John Ryder, president and chief operating officer executive officer of Metro Foods.

"We anticipate we will continue our strong growth plans over the next few years," Ryder said, adding that more competitive costs should translate into lower prices for consumers.

The new stores will feature expanded departments that sell toys and baby food and products, Ryder said.

The chain will include pharmacies in its new stores and, over the next 15 months, in its existing 18 stores.

Combined with Richfood, Supervalu will operate 28 full-line distribution centers; 11 limited assortment distribution centers; 308 supermarkets, including Cub Foods, Shop `n Save, bigg's, Scott's Foods, Laneco and Horbachers as well as Richfood's three chains; and 791 Save-A-Lot limited assortment food retail stores.

Most of its food chains operate autonomously, although Supervalu is consolidating separate Cub Foods chains in Minneapolis, Chicago, Denver and Indianapolis into a single company, Bolton said.

As food retailers have increasingly merged to stay afloat in a fiercely competitive industry, wholesalers have had to strengthen their retailing divisions, analysts said. Doing so ensures the viability of a wholesaler's grocery store business and keeps strong locations away from competitors, said Charles E. Cerankosky, managing director of McDonald Investments in Cleveland.

Food retailing "is the fastest-growing part of the food marketing industry right now," Cerankosky said. "The independent grocers served by a wholesaler are under pressure, and only the best are surviving. Supervalu and Richfood have done a good job of cultivating that type of customer."

Supervalu also said yesterday that it is creating a new distribution region, with headquarters in Richmond, that will combine Richfood's operations in Pennsylvania and Virginia and Supervalu's plants in Perryman, in Harford County, and in Reading, Pa.

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