LOS ANGELES -- Fore! That's the way the three-way merger among Fred Meyer Inc., Portland, Ore.; Ralphs Grocery Co., Compton, Calif.; and Quality Food Centers, Bellevue, Wash., was apparently initiated -- on a golf course, between two men who don't really play golf.
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But somewhere during that game the idea for last week's merger evolved, Burkle said.
QFC was in the midst of negotiating to acquire Hughes Family Markets, Irwindale, Calif., a 57-store southern California chain, "and [Zell] asked me if I thought a combination of Ralphs and Hughes made sense," Burkle said.
"But we had too much going on at Ralphs at the time to look at it seriously.
"However, when [Zell] brought it up again about three months ago, I said it probably did make sense.
"At about the same time, Goldman Sachs [the New York-based securities firm] approached Bob Miller [Fred Meyer chairman] to see if it made sense for Fred Meyer to do something with Ralphs and QFC, after which, [Miller] called me and we said, 'Let's talk about it.'
" Zell could not be reached for comment. However, William P. Ketcham, senior vice president of marketing and public affairs, for Quality Food Inc. -- QFC's holding company -- described Zell as "a patient investor who is philosophically a consolidator who likes to build scale and shareholder value."
According to Ketcham, the merger "was just kind of an opportunistic event; something that seemed to happen when the stars were in a certain alignment. No one was out looking to make the deal that was made, but when it came along, [Zell] felt it was the right thing to do." Ketcham said it is not clear yet what role, if any, QFI's three executives -- Chris Sinclair, president and chief executive officer; Fred Miles, senior vice president and chief financial officer; or Ketcham -- will have after the merger. "Until then, we will continue to work with QFC and Hughes to make sure things run according to plan. After the merger, it's up to [Zell] or Fred Meyer Inc."
Zell will be a member of the new Fred Meyer's board of directors.
Yucaipa, which will emerge from the merger as Fred Meyer's largest single shareholder, has made a major impact on Western food marketing in a very short time.
It consolidated Alpha Beta Co., Boys Markets and Food 4 Less warehouse stores under the aegis of Food 4 Less Supermarkets in 1988, and then acquired Smitty's Supermarkets, Phoenix, in 1994.
In June 1995, it merged Food 4 Less with Ralphs, and in March 1996, it sold Smitty's to Smith's Food & Drug Centers, Salt Lake City -- gaining a 24% equity stake in Smith's, with Burkle becoming Smith's chief executive officer.
In September, Smith's was merged into Fred Meyer Inc. -- with Burkle becoming chairman and Yucaipa becoming Fred Meyer's largest single shareholder, with slightly more than 10% of its common stock. Burkle declined to say how much of the new entity his company will control, though he acknowledged that Yucaipa will be remain the largest single shareholder, with more than its current 10% stake.
Yucaipa also controls the equity of Dominick's Finer Foods, Northlake, Ill. Burkle said Yucaipa plans to retain that ownership position. Asked if Yucaipa might consider selling Dominick's to finance another acquisition within the Fred Meyer geographic operating area, Burkle replied, "We always have money for deals. We don't have to sell something to finance another deal."
