FARMER JACK TALKS AT 'FRAGILE' STAGE

Jon Springer

MADISON HEIGHTS, Mich. -- The union representing workers at Farmer Jack stores last week said it was talking with a potential buyer for the chain, but observers told SN a deal could still be months away.

Montvale, N.J.-based A&P has said it would like to sell 70 Farmer Jack stores as a single chain before the end of its fiscal year in February. An A&P spokeswoman last week declined to comment on the talks.

Victoria R. Collins, president of the United Food and Commercial Workers Local 876 here, said in a recorded message that the union has had "preliminary discussions with potential buyers" for the chain in an attempt to preserve union jobs. Collins emphasized that no purchase agreement had been reached, and did not identify the potential buyers, saying talks were "fragile and confidential."

Negotiations began last week "on a tentative contract that would be acceptable to the membership and a new owner," according to an update on Local 876 Web page.

A&P earlier this year closed or sold more than 30 stores in its Midwest division, including all but one of its Food Basics discount stores, in part to market Farmer Jack as a viable business going forward. But a difficult economy in Detroit -- where Ford, General Motors, Kmart and Northwest Airlines have all cut jobs recently -- could ultimately result in stores being purchased individually or in smaller groups.

That stores would be purchased as a single group, then divided among several buyers, is another possibility, analysts told SN.

"Just about everybody in the industry has looked at [Farmer Jack] but from what we're hearing, it's just hard to find the bottom of the business -- that's because of the economy and not the company," Burt P. Flickinger III, managing director, Strategic Resource Group, New York, told SN.

Chuck Cerankosky, analyst, KeyBanc Capital Markets, Cleveland, said buyers would probably want to match or improve upon the contract between Local 876 and market leader Kroger.

"A buyer has to have its cost structure adjusted ahead of time, and even more importantly, make sure it is paying the right price," he told SN.

Some have speculated that Spartan Stores, in Grand Rapids, Mich., would be interested in Farmer Jack, but its chief executive officer, Craig Sturken, indicated in a conference call earlier this year that it was unlikely to make a big purchase. Spartan has added some former Farmer Jack and Food Basics stores as supply clients in recent months. C&S Wholesale Grocers, Keane, N.H., has also been mentioned as a potential suitor. Spartan declined to comment, and C&S officials were unavailable.

Cerankosky said Kroger could buy at least some Farmer Jack locations.