SpartanNash to buy produce distributor Caito

SpartanNash said Friday it has entered into an agreement to purchase produce distributor Caito Foods Service and Caito's Blue Ribbon Transport business in a deal officials said would strengthen Spartan's offering of high-growth items like fresh prepared foods.

Grand Rapids, Mich.-based SpartanNash said it would pay $217.5 million in cash for Caito, while providing potential additional payments of up to $12.4 million if the business achieves certain performance targets.

The deal continues a trend among food distributors to further diversify into specialty and fresh items to better serve retail customers in growing categories. Spartan's competitors including UNFI and C&S Wholesale have announced several such deals in recent years.

Founded in Indianapolis in 1965, Caito supplies fresh fruit and vegetables to grocery retailers and food service distributors across 22 states in the Southeast, Midwest and Eastern United States. Caito and BRT generate combined annual revenue of $600 million and serve customers from distribution facilities in Indiana, Ohio and Florida. The deal brings Spartan Caito's fresh-cut fruits and vegetable business, along with its newly constructed Fresh Kitchen facility, which is designed to process and package fresh-prepared foods. The $32 million, 118,000-square-foot facility in Indianapolis will process, cook and package fresh protein-based foods and complete meals and is expected to be fully operational in the first quarter of 2017.

Officials said the acquisition would strengthen SpartanNash’s product offerings to its existing customer base by expanding into the fast-growing freshly prepared center plate and side dish categories.

“We are excited about this opportunity to expand our presence in serving some of the fastest-growing categories in grocery, including fresh produce, value-added fruits and vegetables and protein-based prepared food,” Dennis Eidson, SpartanNash’s CEO and chairman, said in a statement. “Caito Foods Service is a premier distributor with best-in-class food processing facilities, including its new Fresh Kitchen. In addition, Caito’s service area is complementary to our current distribution footprint, and we look forward to serving customers in new areas in addition to enhancing our offerings to existing customers.”

Caito’s senior leadership team, including president Robert Kirch and Blue Ribbon Transport president David Frizzell, will join SpartanNash upon completion of the transaction. Kirch will report to Dave Staples, Spartan's president and COO Frizzell will report to Derek Jones, EVP and president of Spartan's wholesale and distribution operations. Both will continue in their roles and oversee the acquired operations which will remain based in Indianapolis.

“With our long history and family tradition of processing and distributing fresh, convenient, healthy foods, we are excited and proud to join an organization that shares our passion and commitment to serve customers with the freshest foods," Kirch said in a statement. "We are looking forward to joining the SpartanNash family to expand and enhance our combined ability to deliver high quality fresh products efficiently to a greater number of customers across the country.”

Spartan said the purchase price would be funded with proceeds from its asset-based lending facility. The deal is expected to close in early January.