As we wait for Winn-Dixie Stores Inc. to complete its merger with BI-LO LLC, the big unanswered question in the Jacksonville business community is, where will the merged company put it headquarters: Jacksonville or BI-LO’s home in Greenville, S.C.?
But Winn-Dixie shareholders have a different question. Will someone come in with a higher offer and top BI-LO’s bid of $9.50 a share to buy all of Winn-Dixie’s shares?
While the $9.50 price was 75 percent higher than Winn-Dixie’s market price before the deal was announced, Winn-Dixie’s stock did trade as high as $10.08 earlier this year. Some shareholders might be thinking of holding out for a better offer.
But analysts who follow Winn-Dixie think it’s unlikely.
“We believe that shareholders will approve the merger given its steep premium to Friday’s close. At the same time, we do not believe that a competing bid is likely even though it appears that buyers are getting a decent deal,” said Scott Mushkin of Jefferies & Co. in a research note.
“We see very little likelihood that another bidder emerges,” said Karen Short of BMO Capital Markets in her report.
“In our view, Winn-Dixie has unofficially been ‘for sale’ since emerging from Chapter 11 in the spring of 2006 and no bidder has emerged, so we see the probability of a higher bid emerging as extremely unlikely, especially given the termination fees included in the merger agreement,” Short said.
Winn-Dixie would have to pay BI-LO $19.6 million if it terminates the merger agreement, and BI-LO would have to pay Winn-Dixie $72.8 million if it cancels the deal, according to a Securities and Exchange Commission filing.
Both Mushkin and Short said other supermarket companies that have been the subject of merger rumors over the years are probably not in a position to make a competing bid for Winn-Dixie.
“In our view, Kroger would never acquire a turnaround in a new market — especially given the formidable competition from both Wal-Mart and Publix. An acquisition by Delhaize would do little to strengthen Delhaize’s positioning in overlapping markets, and the FTC would never approve an acquisition by Publix. We see very few other ‘logical’ bidders for the Winn-Dixie assets,” Short said.
“Our research suggests Delhaize would be the most likely other suitor,” Mushkin said. Delhaize Group is the Belgium-based parent company of Food Lion and several other supermarket chains.
“After speaking with our European counterparts, however, it appears the timing for Delhaize may be more difficult with other internal initiatives currently taking precedent, including turning around its largest banner in the U.S., Food Lion,” Mushkin said.
Winn-Dixie’s previous shareholders were wiped out by its Chapter 11 bankruptcy restructuring in 2005 and 2006, including the Davis family of Jacksonville who owned 36 percent of the stock.
When the company emerged from bankruptcy at the end of 2006, its old stock was canceled and new stock was issued to creditors to pay off its debts.
With the new stock, there are no large shareholders who could influence the merger vote by themselves. According to Winn-Dixie’s most recent proxy statement, the largest shareholder is Dimensional Fund Advisors LP of Austin, Texas, with 6.5 percent of the stock.
The post-bankruptcy stock opened at $14.70 when it began trading in December 2006 and reached the low $30s in the first half of 2007 on optimism about Winn-Dixie’s early results after getting out of bankruptcy. But the stock fell back and has been below $10 for most of the past year.
The merged company will have nearly 700 stores in eight states and more than $9 billion in annual revenue, so it will remain a Fortune 500 company.
As privately owned BI-LO takes over, its finances will no longer be visible. For those of us who have watched Winn-Dixie over the years, it will be sad to see the stock disappear.
But there is hope. Short’s report on the merger cites “the eventual potential to IPO in several years (once Winn-Dixie’s fundamentals have improved) as a dominant Southeast chain with 700-plus stores and $10 billion in revenues.”
So maybe a third incarnation of Winn-Dixie stock is in the future.
Vulcan restructing expands Jacksonville operations
Before Vulcan Materials Co. rejected a hostile takeover bid from Martin Marietta Materials Corp. last week, it announced a corporate restructuring that would have a positive impact on its Jacksonville operations.
Birmingham, Ala.-based Vulcan said it plans to consolidate its eight operating divisions into four regions, including a South region headquartered in Jacksonville.
Vulcan has maintained Jacksonville as the headquarters of its Florida Rock division since acquiring Jacksonville-based Florida Rock Industries Inc. in 2007. It currently employs 73 people in Jacksonville.
James Hill, president of the Florida Rock division, would become senior vice president in charge of the South region, which would also include a quarry and harbor on Mexico’s Yucatan Peninsula.
But the restructuring would be moot if Martin Marietta is ultimately successful in its bid to take over Florida Rock. Vulcan said in its announcement last Monday that its board of directors approved the restructuring before Martin Marietta announced its $4.8 billion takeover bid on Dec. 12.
Vulcan’s board is recommending that its shareholders reject Martin Marietta’s offer of one-half share of Martin Marietta stock in exchange for each Vulcan share.
LPS stock drops on another foreclosure lawsuit
Lender Processing Services Inc.’s stock dropped by $3.34 to $14.30 on Dec. 16 after Nevada Attorney General Catherine Cortez Masto announced a lawsuit against the Jacksonville-based company for its actions in the foreclosure mess.
The Nevada suit was the latest legal action against LPS based on allegations that one of its subsidiaries falsified documents for lenders that were foreclosing on homeowners.
LPS said in a news release that it “strongly disputes” the Nevada allegations and will “vigorously defend against the complaint.”
The investigations into the role of LPS in the foreclosure crisis by various federal and state authorities have now been under way for about two years with no end in sight.
Hawkins named Stein Mart COO
Stein Mart Inc. announced last week that D. Hunt Hawkins was named chief operating officer. Hawkins was previously executive vice president and chief administrative officer of the Jacksonville-based fashion retailer.
Stein Mart is still searching for a new chief executive officer since the departure of David Stovall in September.
Web.com gets analyst recommendation
J.P. Morgan analyst Sterling Auty last week initiated coverage on Jacksonville-based Web.com Group Inc. with an “overweight” rating and an $18 price target, with the stock trading below $10.
“Through acquisition and internal development, Web.com has created a business with economies of scale and operating efficiencies to capitalize on the opportunity to provide small businesses with an online presence,” Auty said in his report.
“While macro headwinds persist, operating fundamentals have begun to improve, and at current levels we believe the valuation is just too attractive to ignore,” he said.
Web.com’s stock rose $1.08 to $10.67 Tuesday after the report.
Solar Energy Initiatives reports no revenue
Solar Energy Initiatives Inc. filed a quarterly report with the SEC that showed no revenue for the three months ended Oct. 31.
The solar energy company recently moved its headquarters from Ponte Vedra Beach to Kingstree, S.C., according to previous SEC filings.
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