Giant-Pa. to Acquire Ukrop's

JON SPRINGER

RICHMOND, Va. — Ukrop's Super Markets, the family-owned chain that became a local institution and an industry icon, is being acquired by Ahold's Giant-Carlisle division, the chains said last week. Ahold said it would pay about $140 million for 25 stores and one new location.

The sale announcement ends months of speculation about the future of Ukrop's, which was founded here in 1937 by Joe Ukrop and grown into a 27-store chain by his sons, Jim and Bobby Ukrop. The chain is noted for pioneering strategies including loyalty cards and prepared foods that became staples of the supermarket industry, while adhering to high levels of customer service and firm policies of not opening on Sundays or selling alcohol.

Giant-Carlisle, the Ahold division based in Carlisle, Pa., like Ukrop's is a non-union operator. It is known for operating large stores focused on variety and everyday low prices under the Giant and Martin's names in Pennsylvania and Maryland.

Giant said it would operate the stores under the Ukrop's name and continue its policies of closing on Sundays “for the time being.”

“Over time, we intend to build on the Ukrop's heritage and strengths and introduce the characteristics for which Giant and Martin's are well-known,” Tracy Pawelski, a Giant spokeswoman, told SN. “Our goal will be to enhance the shopping experience and minimize any disruption to customers accustomed to shopping at the stores.”

Reports last week said Ahold would change store hours and sell alcohol only after retiring the Ukrop's name “in a couple of years.”

“Ukrop's is a great company with a strong heritage in an attractive market,” John Rishton, Ahold's chief executive officer, said in a statement. “We believe that Giant-Carlisle and Ukrop's will be a strong combination.”

Ukrop's has estimated annual sales of about $600 million. As reported previously in SN, a first attempt to sell the chain resulted in a bid from a private equity group, but that deal fell apart due to financing concerns and also because of expenses that would be associated with breaking Ukrop's supply contract with Supervalu.

Sources speaking on condition of anonymity last week said that group was associated with Alex Lee, the Hickory, N.C.-based investor whose holdings include the food distributor Merchants Distributors and the retailer Lowes Foods. Harris Teeter was also said to be a bidder for Ukrop's, but its interest was in particular locations only.

Bids for the company were complicated in part by Ukrop's deteriorating performance amid the economic downturn, sources said. The company closed two stores this year and reported recently that sales and earnings had decreased for the most recent fiscal quarter.

Ahold's bid included all but one currently operating Ukrop's store — it was not immediately known which Ukrop's location was not included in the deal. Joe's Market, a small specialty store, was not purchased by Ahold, nor were Ukrop's commissary and bakery businesses.

Pawelski said the stores would continue to be serviced through Supervalu for the time being.

Industry observers told SN Giant could realize significant benefits as a result of the deal and said the acquisition signals Ahold's new financial strength after spending much of the decade shedding stores.

“Ahold has been a company focused on divesting its properties for several years,” Neil Stern, senior partner at McMillan Doolittle, Chicago, told SN. “This is a good indication that they feel they have they have their business back in order.”

“It's a strong strategic fit,” added Burt P. Flickinger III, managing director of Strategic Resource Group, New York. “There's certainly some sales upside opportunities for Giant — longer hours, holiday openings and, obviously, opening on Sundays. It also gives Giant more scale in terms of procurement power.”