SMITH'S COMPLETES SMITTY'S MERGER PLAN

ELLIOT ZWIEBACH

SALT LAKE CITY -- Smith's Food & Drug Centers here completed its recapitalization and merger plan last week. The merger, approved by Smith's shareholders at last week's annual meeting here, involves the issuance of Smith's stock to current shareholders of Smitty's Supermarkets, Phoenix, whose major shareholder is Yucaipa Cos., a Los Angeles investment firm. Smitty's will become a part of Smith's, giving Yucaipa an ownership and management position in Smith's.

The recapitalization, completed last Wednesday, involved Smith's purchase of 50% of its outstanding Class A and Class B common stock at a cash price of $36 per share, for a total of $451.4 million. After the stock purchase, Cactus Acquisition -- a temporary Smith's subsidiary formed for the purpose -- consummated the merger with Smitty's, a 28-unit chain. Smith's has 30 Arizona stores and is expected to put its own banner on Smitty's stores soon. Under the merger terms, Smith's agreed to enter into a management services agreement with Yucaipa, under which Ronald W. Burkle, the investment firm's managing general partner, will become chief executive officer of Smith's. Also, Burkle and another Yucaipa designee were given seats on Smith's board of directors, and Smith's agreed to repay $667.9 million of its own debts plus $101.9 million of Smitty's debts.