KANSAS CITY, Kan. -- Associated Wholesale Grocers here is awaiting approval from the Securities and Exchange Commission on a proposed initial public offering of about 29% of its stock, industry observers told SN last week.
AWG officials declined to comment last week. The $3 billion cooperative, the nation's fifth-largest wholesaler, serves more than 800 customers located primarily in Kansas, Missouri, Oklahoma and Arkansas, with additional volume emanating from adjacent areas, including Kentucky, Tennessee, Nebraska, Iowa and Texas.
The company has already outlined the IPO to its members -- a move that prompted one customer to send a letter to all AWG retailers urging them to vote for the proposal.
Ron E. Kleier, president and chief executive officer of Country Mart Food Warehouse, a six-store operation based in Gardner, Kan., told SN he wrote the letter "because I'm a firm believer in [the IPO] going forward because it is a great deal for all concerned."
In the letter, Kleier said taking AWG public is "a once-in-a-lifetime opportunity for all of us to be on the ground floor of something tremendous." Among the reasons for his enthusiasm, he said in the letter, is the likely increase in the value of AWG's stock that would result, "but the only way to experience it is to go public."
Kleier noted that since Richfood -- the fourth-largest U.S. wholesaler, based in Mechanicsville, Va. -- went from a co-op to a public company eight years ago, the value of its stock has increased 10 times. "We do not know that AWG will have a similar success, but the upside potential is substantially greater than we can look forward to from operating retail grocery stores," he wrote.
"With the warehouse's strong, aggressive management and with the capital AWG will have for growth after the public offering, it is reasonable to imagine that the stock will double or triple in value in just a few years," Kleier said.
He also warned that remaining a cooperative will not guarantee year-end rebates. "AWG must have the capital to expand and maintain growth in future years, rather than distributing its profits back to the retailers [in the form of rebates].
"What a help it will be to add the AWG public stock to our balance sheet. This added capital would enable all of us to pay off debts, expand our stores, acquire new stores, increase liquidity and be stronger operators for the future," Kleier noted.