PEWAUKEE, Wis. -- Roundy's here said last week it will convert from a member-owned cooperative to a purely voluntary wholesaler with retail stores if its members approve the sale of the company to Willis Stein & Partners, a private equity investment firm based in Chicago.
Following last week's announcement that the two companies have signed a definitive agreement, Roundy's said members will vote on a proposal to sell virtually all of their stock to Willis Stein -- though management will be given the opportunity to take an equity position as well.
In an interview with SN, Avy Stein, managing partner of Willis Stein, declined to pinpoint how much money his company will invest in Roundy's, "but we plan to contribute whatever capital is necessary so Roundy's has the ability to grow organically and through acquisitions as needed, and we expect our involvement will give a great company a chance to be better capitalized and to grow substantially over the next several years."
If the acquisition is approved, Roundy's said Gerald F. Lestina, 59, president and chief executive officer, will step down, with Robert A. Mariano, 52, succeeding him with the additional title of chairman. Mariano, the former president and CEO of Dominick's Finer Foods before it was sold to Safeway in 1998, has been working for Willis Stein for the past several months.
According to a Roundy's spokesman, the company will proceed with its scheduled annual meeting on April 23. It also expects to schedule a special meeting sometime later this month to answer shareholder questions, then to mail out proxies for a formal vote -- a process the company expects to complete by the end of May or early June, he told SN.
The spokesman said the proposed sale is designed to give Roundy's the funding it will need to remain independent and to expand. "We've been limited in our ability to raise the capital we needed to replace distribution facilities, build stores and do acquisitions," he told SN. "We've been looking for a way to access capital, but as a closely held corporation, we've been severely limited.
"But with Willis Stein as an investor, we'll be able to access the capital we need to grow and maintain our independence and to avoid being swallowed up by other food companies."
Terms of the proposed acquisition were not disclosed.
The acquisition of Roundy's will mark Willis Stein's first investment in the food-distribution industry and will serve as a platform on which it will expand its food-related investments, Stein told SN.
He said he anticipates acquisition opportunities on both the wholesale and retail sides of Roundy's business, "although we're looking initially at store acquisitions. And while there could be some wholesale opportunities that come up, we're not focusing in that direction right now."
Stein said he sees a lot of growth opportunities for Roundy's. "There is still room for growth and consolidation within the industry, and we think independents who are No. 1 or 2 in their markets have great potential as acquisition candidates."
Roundy's could make one or two small retail acquisitions during the balance of this year, he noted, "but our initial focus over the next few months will be getting our arms around things at Roundy's."
Stein said Roundy's management will have the opportunity to take an equity position in the company "because we believe ownership gets management people motivated and puts all the arrows in the same direction, and we like situations where, as a company does better, its executives can do better."
Willis Stein, which was formed in 1995, has investments in 16 middle-market companies in the fields of publishing, business services, information technology, telecommunications, manufacturing and health care.
While Willis Stein was contemplating an investment in food distribution, it hired Mariano to help uncover potential opportunities, Stein told SN. "Bob came along just as we were getting more serious about the business," he said, "and when Roundy's came to us, we became very excited."
Roundy's had sales of approximately $3.5 billion for the year ended Dec. 31. It operates nine distribution facilities serving more than 800 supermarkets in 12 states, and it operates 61 corporate stores that accounted for 40% of total sales
Corporate banners include 36 Pick 'n Save units (33 in Wisconsin, two in Ohio and one in Indiana); 22 Copps Food Centers in Wisconsin; and four smaller stores, called Orchard Markets, in Ohio. It also licenses the Pick 'n Save name to 37 retail customers in Wisconsin.
The Copps stores were part of Roundy's acquisition last May of The Copps Corp., Stevens Point, Wis., a $600 million company. At that time, Roundy's said the acquisition strengthened its ability to maintain control over its own destiny.
Roundy's was founded in 1872 as a wholesale grocery warehouse. In January 1953 Roundy's incorporated as a member-owned cooperative. Lestina joined the company in 1970, was named president in 1993, and added the title of CEO in 1995.
A couple of years later, Roundy's contemplated a merger with Spartan Stores, Grand Rapids, Mich., but that deal was called off seven weeks after the companies signed a letter of intent.