RICHFOOD SIGNS DEAL TO ACQUIRE SUPER RITE

ELLIOT ZWIEBACH

MECHANICSVILLE, Va. -- In the latest instance of wholesaler consolidation, Richfood Holdings here said last week it has signed a definitive agreement to acquire Super Rite Corp., Harrisburg, Pa., in a deal valued at $320 million.

The arrangement would make Richfood the fourth-largest wholesaler in the United States, according to volume figures from the wholesaler. Currently Richfood is the 10th-biggest wholesaler.

The combination would also create a Mid-Atlantic powerhouse, with business stretching from New Jersey to North Carolina.

After the merger is completed, Super Rite would operate as a wholly owned subsidiary of Richfood Holdings, with former Super Rite shareholders owning approximately 31% of Richfood's total

common stock outstanding.

Donald D. Bennett would remain chairman and chief executive officer of Richfood Holdings and its Richfood division, while John Stokely, president and chief operating officer of the holding company and Richfood, would retain those titles.

Alex Grass would remain chairman and CEO of Super Rite, and Peter Vanderveen would remain its president and chief operating officer.

The merger has already been approved by the boards of directors of both companies but remains subject to regulatory approvals, approval by shareholders of each company and other customary closing conditions. Shareholders of both companies are expected to vote on the transaction in September.

Richfood posted sales of $1.52 billion for the year ended April 29 while Super Rite had sales of $1.47 billion for the year ended March 4.

The combination, which is expected to be completed sometime before the end of the calendar year, would boost Richfood's sales to $2.99 billion, pulling it virtually even with Associated Wholesale Foods, Kansas City, Kans., whose volume is about $3 billion.

However, Richfood said its volume will actually exceed $3 billion once sales of two recent acquisitions -- Rotelle Inc., a wholesale frozen food distributor based in West Point, Pa., acquired in August 1994, and the wholesale division of Camellia Food Stores, Norfolk, Va., acquired in early April this year -- are included for a full year.

That would move Richfood past AWG to become the fourth-largest wholesaler, behind Fleming Cos., Oklahoma City ($19.1 billion); Supervalu, Minneapolis ($16.6 billion), and Wakefern Food Corp., Elizabeth, N.J. ($3.7 billion).

Richfood services 1,500 stores throughout the mid-Atlantic region -- including Virginia, West Virginia, northeastern North Carolina, southern Pennsylvania, New Jersey, Delaware and Maryland -- from a 1.3 million-square-foot distribution center here. Rotelle operates a 185,000-square-foot warehouse.

Super Rite supplies 238 supermarkets in Pennsylvania, New Jersey, Maryland, Delaware, Virginia and West Virginia out of two distribution centers in Pennsylvania -- a 650,000-square-foot grocery warehouse with some refrigerated capacity and a 200,000-square-foot frozen food warehouse.

It also operates a retail grocery division consisting of eight Metro superstores in the Baltimore area and Dover, Del., and seven Basics supermarkets in metropolitan Baltimore.

While there is some geographic overlap between the two companies, there is virtually no overlap among customers except in Maryland, a Super Rite spokesman told SN.

According to Gary Giblen, managing director of Smith Barney, New York, "The fact the two companies are beginning to butt heads geographically makes a good rationale for the merger."

Both Giblen and Ed Underwood, a securities analyst with Scott & Stringfellow, Richmond, Va., said Richfood is likely to seek additional growth through acquisitions, though both also said Richfood could be positioning itself for sale to another wholesaler at some point.

Richfood said it does not anticipate that the wholesale operations of either company would be materially affected by the merger.

According to Bennett, "Richfood and Super Rite will benefit from combining their complementary markets and creating a larger customer base [because] the companies presently have little geographic or customer overlap.

"Also, we each operate efficient distribution facilities that can handle added capacity, providing an attractive opportunity for leverage.

Grass said, "High volume and high efficiency are the keys to producing attractive growth in wholesale food distribution, and the new organization to be created through the combination of Super Rite and Richfood should be a leader in this regard.

Giblen said the merger is logical "because it brings together two regional food wholesalers whose growth has been stronger than either of the two leading wholesalers, Fleming or Supervalu."

That growth, Giblen said, has been generated by each company's largest customers: Ukrop's Super Markets in Richmond, Va., and Farm Fresh, Norfolk, Va., for Richfood; and Giant Food Stores, Carlisle, Pa., and Shopper's Food Warehouse Corp., Harrisburg, Md., for Super Rite.

Because of the pending merger, Super Rite said it has indefinitely postponed its annual meeting, which was previously scheduled for July 12. Instead, it said it will hold a special shareholders meeting to consider the merger sometime in September.

Richfood said its shareholders will vote on the merger at its annual meeting, which will be held the same day as the Super Rite special meeting.