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- 2011 - December - 20th -

Winn-Dixie CEO Lynch: ‘It’s a perfect fit’: Chairman assesses merger with BI-LO

by Mark Basch, Contributing Writer

It’s a supermarket chain that successfully reorganized its finances through Chapter 11 bankruptcy and has embarked on a remodeling program to upgrade its stores.

It has several sales promotions to entice customers, including a “fuelperks!” program that allows shoppers to earn gasoline discounts by purchasing groceries.

And it is known for giving back to the community.

Sound familiar? The company is BI-LO LLC, a Greenville, S.C.-based company that operates 207 supermarkets in North Carolina, South Carolina, Georgia and Tennessee.

The company announced an agreement Monday to buy Jacksonville-based Winn-Dixie Stores Inc., which has a very similar profile.

“When I was looking for someone to team up with, BI-LO was very, very similar,” Winn-Dixie Chairman, President and CEO Peter Lynch said Monday in a telephone interview.

“It’s a perfect fit coming together,” he said.

Privately owned BI-LO will pay $9.50 in cash per share to buy all of Winn-Dixie’s stock, a deal valued at a total of $560 million. The deal represents a 75 percent premium to Winn-Dixie’s closing stock price on Friday.

“I think it’s a great return to our shareholders,” Lynch said.

The deal calls for BI-LO to continue operating its stores under the BI-LO name, and for Winn-Dixie to operate its 480 stores in Florida, Georgia, Alabama, Mississippi and Louisiana under the Winn-Dixie name.

The companies have not decided whether the headquarters of the merged company will be in Jacksonville or Greenville. Lynch said other than possible changes in top management, which also have not been determined yet, he expects few changes in Winn-Dixie’s headquarters operations.

“I see very little effect on the headquarters here,” he said.

The merger announcement came just four days after Winn-Dixie announced a $1.4 million donation program to 116 charities in the Southeast. Lynch said the merger won’t impact the company’s commitments to the local community.

“The expectations should be no change. We should be very involved in the community,” he said.

He said the merger also would not affect the company’s sponsorship of the Winn-Dixie Jacksonville Open golf tournament. Lynch said one of his first calls Monday morning was to the PGA Tour to assure officials that the tournament sponsorship will continue.

BI-LO is owned by a Dallas-based private equity firm called Lone Star Funds. It is a smaller chain than Winn-Dixie, with 2010 sales estimated at $2.2 billion, according to Supermarket News. Winn-Dixie reported sales of $6.9 billion in the fiscal year that ended in June.

Lone Star gives BI-LO a solid financial backing which will help Winn-Dixie grow, Lynch said.

BI-LO went into Chapter 11 bankruptcy in March 2009 to restructure debt that was coming due, and emerged from bankruptcy in May 2010. Lone Star maintained ownership of the company through the restructuring process.

Winn-Dixie filed for Chapter 11 reorganization in February 2005 and emerged in November 2006.

Like Winn-Dixie, BI-LO has been remodeling its stores. Lynch thinks Winn-Dixie is ahead of BI-LO, particularly with what the company calls “transformational” store remodels that feature a more upscale design and fresh food items.

“I think we’re taking it to an entirely new level,” Lynch said. He added that BI-LO may be able to offer input on features to improve Winn-Dixie stores.

“What you’re going to see is the best of two companies coming together,” he said.

Lynch would not comment on which company first sought out a merger, but he said as he looked into BI-LO and Lone Star, a merger “made a lot of sense to me.”

“In my mind, this was the next logical step for Winn-Dixie,” he said.

Lynch said the merger process will not affect customers at all.

“It’s business as usual. It’s a great thing for Winn-Dixie. It’s great for our associates and our customers,” he said.

The companies hope to close the merger in 60 to 120 days.

Mayor Alvin Brown, who frequently refers to his past employment with Winn-Dixie, said he spoke with Lynch Monday morning about the merger.

Brown said the merger will infuse more resources into Winn-Dixie while maintaining the brand.

“BI-LO is still going to be BI-LO,” Brown said. “Winn-Dixie is still going to be Winn-Dixie.”

Nonprofit Center of Northeast Florida CEO Rena Coughlin said she hopes that the headquarters will remain in Jacksonville.

“Winn-Dixie has been a great corporate citizen and having the company headquartered here has helped make it easier for the company and nonprofits to know and trust each other, developing longstanding relationships of mutual support,” she said.

“Let’s hope the merger brings additional interest and investment to our community,” she said.

mbasch@baileypub.com

356-2466

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