RICHMOND, Va - Richfood Holdings, Inc. announced that it has reached an agreement in principle to acquire substantially all of the assets of Farm Fresh, Inc., a privately-held supermarket chain based in Norfolk, Virginia. The proposed acquisition has been approved by an informal committee comprised of holders of a substantial majority of Farm Fresh's senior notes. The agreement in principle is subject to the execution of a definitive agreement, as well as other terms and conditions.
To effect the transaction, a newly formed subsidiary of Richfood will purchase substantially all of the assets and assume certain liabilities, including all trade liabilities, of Farm Fresh. Under the terms of the agreement in principle, Richfood will not assume Farm Fresh's senior notes or other indebtedness for money borrowed, or its lease obligations for previously-closed stores or six currently-operated stores that will be closed in connection with the proposed sale. The anticipated purchase price is expected to consist of approximately $220 million cash, plus the value of certain assumed capital leases, plus 1.5 million warrants for the purchase of shares of Richfood common stock at an exercise price of $25 per share with a term of five years following issuance. The exact amount of the cash purchase price will vary depending on changes in Farm Fresh's working capital and the capital lease obligations assumed by Richfood.
Upon completion of the acquisition, Farm Fresh will operate as a separate, wholly-owned subsidiary of Richfood. Farm Fresh's headquarters will remain in Norfolk. The combined Company is expected to have annualized net sales of approximately $3.8 billion, based on the most recent fiscal year results for Richfood and Farm Fresh. Including Richfood's existing METRO/BASICS retail stores, the combined Company will operate 59 supermarkets in the Mid-Atlantic market with annualized retail net sales of approximately $1 billion.
John E. Stokely, Richfood's President and Chief Executive Officer, said, "The combination of Richfood and Farm Fresh will unite the premier wholesale food distributor in the Mid-Atlantic region with the premier retail grocer in the Tidewater region. Farm Fresh is a strong franchise with excellent store locations and a solid marketplace reputation built over the past 40 years."
"We expect the transaction will be accretive to Richfood's earnings immediately in its first full fiscal year and to provide other significant benefits by adding volume to our wholesale network and by preserving our share of market in the important Tidewater region," Stokely added. "We also see strong potential synergies in both the wholesale and retail operations through better utilization of our logistics infrastructure and existing transportation fleet, as well as enhanced procurement and private label opportunities. In addition, the combination affords us the opportunity to realize a variety of operating synergies on the retail side in much the same manner as we have achieved in our wholesale business with previous acquisitions. Importantly, the Farm Fresh retail store operations do not conflict with those of our existing wholesale food distribution customers."
Stokely added, "One of Farm Fresh's greatest assets is its people. We are very enthusiastic about working with Farm Fresh's experienced, dedicated employees to realize the chain's great potential. Richfood is committed to providing the capital resources and infrastructure to support a financially strong, growing and profitable Farm Fresh. With the uncertainty surrounding Farm Fresh's future now removed, a stable environment will permit the Company to start growing again. In this vein, we plan to pursue a major remodeling and upgrade program beginning immediately after we complete the transaction," Stokely concluded.
The transaction is expected to be effected through a prepackaged voluntary reorganization of Farm Fresh under Chapter 11 of the U.S. Bankruptcy Code or other consensual proceeding. Completion of the transaction is subject to execution of a definitive agreement and approval of the reorganization plan by the Bankruptcy Court and the holders of Farm Fresh's senior notes, as well as required regulatory approvals and other customary closing conditions. Subject to these terms and conditions, the transaction is expected to close in early 1998.
For its fiscal year ended December 28, 1996, Farm Fresh posted net sales of $761.5 million, generating operating cash flow of $39.7 million. Farm Fresh operates 48 food stores in the Tidewater, Richmond and the Shenandoah Valley areas of Virginia.
Richfood Holdings, Inc., headquartered in Richmond, Virginia, is the largest wholesale food distributor in the Mid-Atlantic operating region and the fourth largest wholesale food distributor in the United States. The Company provides a full range of grocery, dairy, frozen food, produce and meat products to chain and independent retailers throughout the region.
The Company has four principal operating divisions:
Richfood/Virginia, based in Richmond, operates a 1.3 million square foot distribution center; Richfood/Pennsylvania, based in Harrisburg, Pennsylvania, operates approximately 1.0 million square feet of warehouse capacity in Harrisburg, Pennsylvania and a 6.3 million cubic foot automated frozen food distribution center in West Point, Pennsylvania; the METRO/BASICS Retail Division, based in the metropolitan Baltimore area, operates 16 retail food stores; and the Richfood Dairy, based in Richmond, operates a fluid dairy.
Forward-looking statements in this news release, if any, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain important factors that could cause results to differ materially from those anticipated by the forward-looking statements are discussed from time to time in reports filed by the Company with the Securities and Exchange Commission.
Press Here for Info on Setting Your Own Web Site
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
Web Site: http://www.spcnetwork.com/mii