DALLAS -- Fleming here said last week it has completed the sale of 17 Food 4 Less stores in Northern and Central California to Save Mart Supermarkets, Modesto, Calif., with the sale of 11 more stores pending.Save Mart agreed in November to purchase 28 Food 4 Less stores from Fleming, including two that were under construction. Fleming said it anticipates completing the sale of those two stores before
DALLAS -- Fleming here said last week it has completed the sale of 17 Food 4 Less stores in Northern and Central California to Save Mart Supermarkets, Modesto, Calif., with the sale of 11 more stores pending.
Save Mart agreed in November to purchase 28 Food 4 Less stores from Fleming, including two that were under construction. Fleming said it anticipates completing the sale of those two stores before the end of the first quarter; the sale of the other nine stores is being reviewed by the Federal Trade Commission, it noted.
According to Fleming, cash proceeds from the sale amount to approximately $82 million in cash, including $9 million received during the fourth quarter. It also said the transaction reduces its capital lease obligations by approximately $20 million.
Fleming said it plans to apply all of the cash proceeds to reduce its senior secured term-loan balance of approximately $1.95 billion.
At the time the deal was announced, Fleming said the value of the transaction would be $165 million, including up to $130 million in cash, inclusive of inventory, and $35 million in capital leases. The company said last week the $82 million in cash, plus $20 million in capital leases, is consistent with its previous guidance.
Fleming had been supplying the Food 4 Less stores through its divisions in Sacramento and Fresno, Calif. It said at the time of its preliminary agreement with Save Mart that it would continue to supply the stores for five years, representing volume of approximately $385 million in the first year and $340 million in each of the succeeding four years, making Save Mart one of its five largest customers.
Fleming said it is continuing to seek buyers for its 73 remaining corporate stores, encompassing 44 Rainbow stores in Minnesota, 14 in Texas and single units in New Mexico and Pennsylvania, plus seven Food 4 Less locations in Utah and six in Arizona.
According to Mark Hansen, chairman and chief executive officer, "Once we complete our retail sales, Fleming will become the only pure-play wholesale distribution company with a national footprint. Exiting retail means we will not be competing with our retail distribution customers for shoppers' dollars, which is an important value proposition to many retailers in today's competitive environment."
Fleming said Save Mart has hired substantially all store employees at the acquired locations.
The 28 stores combine for retail sales of approximately $375 million, Fleming said.
Robert Piccinini, chairman, president and CEO of Save Mart, told SN he expects to increase that volume once his company begins operating the stores under its Food Maxx banner. "We think we have a more efficient process in every category than Fleming does because we only service the needs of our own customer base instead of a multitude of companies."
Prior to the acquisition, Save Mart was operating 97 stores with a combined volume of $1.65 billion.
The pending acquisition of 11 more Food 4 Less stores, combined with the 17 already acquired, represents the largest single acquisition for Save Mart since it bought 27 Fry's Food Stores from Kroger Co. in 1989.