Bi-Lo Holdings Said to Eye IPO as Momentum Builds

JACKSONVILLE, Fla. — Bi-Lo Holdings, whose private owners have spent the last few years assembling and reassembling a collection of regional Southern supermarket brands, may now be ready for the public markets.

The company has engaged Citigroup, Credit Suisse AG and Deutsche Bank AG to lead an initial public offering later this year, according to a Reuters report. Representatives of Bi-Lo and its private-equity owner, Lone Star Funds, were not available to comment last week. The Reuters report was based on anonymous sources said to have knowledge of the talks.

“My understanding is that the company is doing quite well. … I assume you don’t do an IPO unless they have a good story to tell” says industry observer Neil Stern.

An IPO could provide an exit for Lone Star, which first invested in Bi-Lo back in 2005 and stuck with its investment through a Chapter 11 bankruptcy and subsequent turnaround. More recently, Lone Star backed Bi-Lo’s $560 million acquisition of larger Southern rival Winn-Dixie, and is in the process of completing a $265 million deal to acquire the Sweetbay, Harveys and Reid’s banners from Delhaize America.

A public offering could also provide additional cash to fuel the ongoing store renovation and pricing programs that officials said have sparked sales momentum at Bi-Lo and Winn-Dixie — and which may be required for some of the assets in the Delhaize deal, which is expected to close later this year.

Read more: The Delhaize-Bi-Lo Deal That Wasn't

Analysts estimate Winn-Dixie and Bi-Lo have around $10 billion in annual sales, excluding the 165 stores in the Delhaize deal. That group did $1.8 billion in sales during 2012, Delhaize said. Bi-Lo officials have not revealed sales and profit figures publicly.

“My understanding is that the company is doing quite well, both with the Bi-Lo stores and the Winn-Dixie integration,” Neil Stern, senior partner for Chicgao consulting firm McMillanDoolittle, told SN last week. “I assume you don’t do an IPO unless they have a good story to tell.”

Randall Onstead

In an interview with SN earlier this year, Bi-Lo Holdings CEO Randall Onstead said attention to neighborhood marketing, and cost benefits resulting from increased size and scale, have been key drivers of Bi-Lo’s momentum. Winn-Dixie and Bi-Lo stores share a heavy emphasis on pricing programs including fuel discounts, extended price discounts, and weekly BOGO specials through their respective loyalty card.

“They’ve had a very focused strategy. They run lean, get some benefits from integrating the companies, and essentially, they’ve invested in lower prices, and that’s resonated with consumers.”

A strong stock market — including wildly successful IPOs of grocers including most recently Sprouts Farmers Market — is likely providing confidence, Stern added.