JACKSON, Miss. -- Jitney Jungle Stores of America here said last week it has agreed to sell 89 of its 137 stores, along with a mix of fuel centers and liquor stores, to Winn-Dixie Stores, Jacksonville, Fla., and Bruno's Supermarkets, Birmingham, Ala.
Jitney said it expects to find buyers for its 48 remaining stores, eight fuel centers and four liquor stores within the next 60 days and to completely shut down its operations early next year, after all transactions have been finalized.
The company has been operating as a debtor-in-possession since filing for Chapter 11 protection in October 1999. Its principal shareholder is Bruckmann, Rosser, Sherill & Co., a New York-based investment firm that acquired the company in 1996.
"Liquidating the company was not the scenario we had hoped for," Ron Johnson, chairman and chief executive officer, told SN. "But given the cards we were dealt, this is the best we can do in a very difficult situation."
Jitney had closed 60 of its 197 stores earlier this year in an effort to find a buyer for what it considered its core operations, Johnson said. Although many of those stores were ultimately sold, the company could not find a buyer for the bulk of the operations, he added, "and for the last three months we talked about the possibility of converting debt to equity and operating as a stand-alone company for the next three years.
"But the banks decided they didn't want to do that."
Johnson said Jitney believes it can sell its remaining properties, which are spread out over Mississippi, Alabama, Florida and Louisiana. "We feel there are high levels of interest in all the stores," he told SN.
It's unlikely that Winn-Dixie or Bruno's will buy any more locations, Johnson said, "since they have purchased all the ones they were interested in. But there's the potential that some other buyers will purchase a few stores each."
Those transactions, along with the agreements with Winn-Dixie and Bruno's, must be approved by the U.S. Bankruptcy Court and government agencies.
Under the agreements disclosed last week:
Winn-Dixie will acquire 72 supermarkets, including 55 in Mississippi, 11 in Alabama, three in Louisiana and three in Florida, plus 32 fuel centers (31 in Alabama, one in Mississippi) and two liquor stores in the Florida Panhandle.
Bruno's will acquire 17 supermarkets -- including 13 in Alabama, four in Florida and one in Mississippi -- plus two fuel centers in Mississippi and Alabama and three liquor stores in the Florida Panhandle.
Johnson said the sale of the 89 stores "represents a significant step in the resolution of Jitney Jungle's bankruptcy. We have greatly improved the operations while operating under Chapter 11, and we believe Winn-Dixie and Bruno's will receive significant value."
He said the stores being sold "are in the best shape they have been in since our bankruptcy filing, and we are well-stocked for the Thanksgiving and Christmas holiday selling season."
Asked what factors contributed most to Jitney's ultimate liquidation, Johnson said it was a combination of the debt leverage created at the time of the buyout in 1996, plus the acquisition of the Delchamps chain in 1997, which doubled the debt. "At the end of the day we acquired some wonderful stores, and with about half of the Jitneys and half of the Delchamps performing very well, we had the makings of a great chain. But the high debt was a problem, and that was made worse by 140 new competitive openings in the last three years."
Analysts contacted by SN said they anticipate the pending acquisition should be very beneficial for Bruno's, but they were divided on the impact on Winn-Dixie.
Jonathan Ziegler, San Francisco-based managing director for Deutsche Banc Alex. Brown, New York, said the pending acquisition of the 72 Jitney stores, combined with the acquisition last summer of Gooding's, Apopka, Fla., should make up for the sales loss the company experienced as a result of closing 111 stores earlier this year as part of its corporate restructuring.
"It's an attractive acquisition for Winn-Dixie that will help leverage its existing infrastructure and increase sales by about 5%," Ziegler said. "The stores are probably less productive now than they will be under Winn-Dixie's management, and the potential is there to increase sales quickly because there have been fairly substantial out-of-stocks during Jitney's Chapter 11. In addition, the stores don't require substantial capital expenditures, though they will require some tinkering."
Gary Giblen, director of research for C L King Associates, New York, took a more negative view of the pending acquisition.
"It comes at a time Winn-Dixie is undergoing a massive restructuring, and this deal will put additional strain on its fragile turnaround as Winn-Dixie continues trying to staunch the bleeding chainwide," he said.
"So the deal is an infinitesimal positive because it shores up the company's market share in some areas, but it's not a transforming event, and I still think Winn-Dixie's future is very dim, given the competitive pressures it faces, particularly from Wal-Mart."
Winn-Dixie said it will pay approximately $85 million, plus inventory, for the Jitney properties, which it said will generate approximately $650 million in annual sales. The 111 stores Winn-Dixie closed this year resulted in a loss of sales estimated at approximately $1.4 billion; the addition of the 72 Jitney units will boost Winn-Dixie volume to about $12.5 billion, down from $13.3 billion last June.
The company said it expects to generate 12-14 cents in additional annualized earnings beginning with its fiscal fourth quarter, which ends in June.
Winn-Dixie said the acquired stores will operate as part of its Louisiana division and will be supplied from its distribution center in Hammond, La., which currently has excess capacity. It also said most of the acquired stores will retain their current operating names, which include Jitney Jungle, Jitney Premier, Sack & Save, MegaMarket and Pump & Save. The company said four acquired stores that operate under the Delchamps name will be converted to the Winn-Dixie banner.
According to Allen R. Rowland, Winn-Dixie president and chief executive officer, "This acquisition is a very good strategic fit [that] will give us good market share in a new geographic area." That area is central Mississippi, which will extend the chain's penetration beyond 14 stores on the state's borders, a spokesman told SN.
"The synergies of the excess capacities of our Hammond, La., retail support center, combined with our manufacturing operations and buying power, should provide positive results for the company," Rowland added.
Johnson said Winn-Dixie bought the right to use the Jitney banners. "After 80 years, there's still a lot of loyalty in Mississippi to that name," he noted.
Bruno's said it will pay $9 million, plus inventory, for the Jitney properties, which generate approximately $153.5 million in annualized sales. Following the acquisition Bruno's will operate 170 stores with volume approaching $2 billion.
Of the 17 stores, 15 operate as Delchamps, a chain Jitney acquired in 1997. Bruno's said it will convert the 17 stores to a variety of banners, with six adopting the Bruno's superstore name (five in Alabama, one in Mississippi); nine operating under the Food World price-impact format (seven in Alabama, two in Florida); one in Mississippi switching to the Food Max price-impact format; and one in Florida converting to the Food Fair neighborhood format.
According to James A. Demme, Bruno's president and CEO, "The 17 stores will help us strengthen our business and achieve economies of scale in our core markets. The transaction is also consistent with our long-term strategic objective, which is to grow our business through selective acquisitions as well as organic growth."
He said Bruno's acquired two Jitney stores earlier this year and four in 1999.
Both Winn-Dixie and Bruno's said they will accept employment applications from all Jitney store employees.
