AWG SET TO ABSORB 38 FOOD BARN UNITS

DON YAEGER

KANSAS CITY, Mo. -- Food Barn Stores will cease operations here March 25 and most of its stores will be taken over by independents that are members of Associated Wholesale Grocers, the wholesaler cooperative.

The move follows failure of Food Barn to win concessions from its labor union on a wage and benefits package.

In the transfer of ownership, AWG here is paying $70 million for the assets of 38 stores that will be spun off to its independents. Two other stores will be closed by Food Barn. The sale of the stores was approved by U.S. Bankruptcy Court Judge Frank W. Koger.

The largest chunk of the Food Barn units reportedly will go to Falley's Inc., Topeka, Kan. That operator, a wholly owned subsidiary of Food 4 Less Supermarkets, La Habra, Calif., will acquire 10 stores. Six of them are in Wichita, Kan., and one each is in El Dorado, Derby and Kingman, Kan., and St. Joseph, Mo.

Food Barn, the last vestige of Safeway in this area, was formed through a leveraged buyout in 1988 by members of Safeway management and a New York investment firm. It plunged into

bankruptcy in January 1993, following losses of more than $100 million during the previous three years.

Mike DeFabis, president of AWG, declined to comment on the disposition of the stores pending closing of the deal on March 29, but noted that 21 retailers participated in the company's internal bidding, four or five of them on more than one store. According to trade sources, other companies besides Falley's getting multiple units include Cosentino's Food Marts and Four B Corp. The latter retailer operates under the Ball's, Hen House and Price Chopper names. Cosentino's is primarily a Price Chopper operator.

DeFabis said he expects some stores to reopen quickly while others will undergo remodeling. Most are expected to embrace one of a half-dozen AWG formats, ranging from Price Chopper to Sun Fresh to Thriftway.

The stores acquired by Falley's will reopen one week after the Food Barn closings, said Kent Laughman, president of Food Barn. The 10 units, to be operated under Food 4 Less and Falley's names, will bring to 38 the number of stores in the Falley's chain. Attorneys involved in the hearing on the sale of assets to AWG expressed surprise that other bidders didn't come forth during the courtroom session. Representatives of Fleming Cos., Oklahoma City, and Schnuck Markets, St. Louis, were reportedly in the room, "apparently waiting to see if the AWG deal would hold together," a legal source speculated. However, industry observers said most potential bidders were not interested in acquiring a block of 38 stores but rather in cherry-picking units.

The deal with AWG was struck after the 2,300 members of Local 576 of the United Food and Commercial Workers refused to accept $4.6 million in wage and benefits concessions that the company said it needed to continue operating. The reopened stores will be primarily nonunion.

A plan providing for liquidation of Food Barn and disposition of assets will be filed with the court before the end of March, said a Food Barn attorney. A confirmation hearing on the plan is expected in May or June.

Under a previous plan for reorganization, since withdrawn, unsecured creditors were to have split a pot of $2 million, each receiving a maximum of 10 cents on the dollar. At the time of the bankruptcy filing, there were 1,500 unsecured creditors, with the amount owed totaling $161,421,000.

As reported, the company said it lost money in each month of 1993. Losses ranged from $1.9 million to $2.9 million per month. Food Barn cut prices and advertised aggressively since entering Chapter 11 protection. Weekly prizes in a 10-week sweepstakes during 1993 included a "his and hers" pair of cars -- a Pontiac Grand Prix coupe and a Grand Prix sedan.