NEW ORLEANS -- Schwegmann Giant Super Markets here reportedly has signed a definitive agreement to be acquired by Kohlberg & Co., Mount Kisco, N.Y., according to local observers.
A representative of Kohlberg was quoted in a local newspaper as saying that an agreement had been signed and that the sale of 28 of the chain's 29 stores was likely by the end of the year, following a review of Schwegmann's operations.
However, the Kohlberg representative backed off on that statement last week, telling SN the newspaper report was "not an accurate characterization of our position at this time." She declined further comment.
Officials at Schwegmann could not be reached for comment last week. However, in a letter to employees reprinted in the local newspaper, John F. Schwegmann, chief executive officer and grandson of the chain's co-founder, acknowledged that the company was in play but noted that nothing had been concluded.
"You should know that no sale has taken place at this time," Schwegmann said in the letter. "The company is, however, actively pursuing various options to strengthen the company's operations, which we believe will be in the best interest of our customers and our employees."
According to observers, the definitive agreement calls for Kohlberg to acquire the business, while Schwegmann would retain the real estate and lease some locations back to the new owners.
Kohlberg owns Southwest Supermarkets, Phoenix, which operates 28 stores -- 25 in Arizona and three in El Paso, Texas. The firm is in the process of selling Bay Area Foods, Danville, Calif., which has three Petrini Markets remaining in northern California, down from 23 stores a year ago.
The observers said Schwegmann's finances have been strained since June 1995, when the chain paid approximately $150 million and took on added debt to acquire 28 stores here from National Tea Co., a St. Louis-based subsidiary of Loblaw Cos., Toronto.
Schwegmann was operating 18 stores at the time of the acquisition. However, the chain was compelled to sell 11 of the stores it acquired, and it subsequently closed six more. As a result, the $500 million boost in sales that Schwegmann had anticipated from the National Tea purchase did not materialize, observers pointed out.
In addition, a long-term National advertising campaign -- using the tagline, "Cheaper than Schwegmann's" -- apparently hurt Schwegmann after it took over the National stores, the observers added. The chain also has been affected over the last few years by an influx of new competition here -- including entries by A&P, Montvale, N.J., and Kmart, Troy, Mich., plus expansion by Winn-Dixie Stores, Jacksonville, Fla. -- and it also made decisions to build a couple of new stores at locations that the company subsequently has had some reservations about, observers said.