THE 60-DAY WONDER

David Merrefield

A few hours after Fleming Cos. acknowledged last Wednesday that it intends to buy Scrivner, a trio of us from Supermarket News found ourselves in a taxi traveling a few blocks uptown from SN's offices in New York to meet with Robert E. Stauth in his hotel suite. Bob Stauth, of course, is the chairman, president and chief executive officer of Fleming, the wholesaler destined to become the nation's largest as soon as the all-cash $1.085 billion buyout of wholesaler Scrivner is completed this summer. Bob and a few other Fleming executives left Oklahoma City, the town where both Fleming and Scrivner are based, last Tuesday night, right after Fleming's board authorized the buyout proposal. His purpose was to get to New York fast so he could preach to Wall Street and others the good gospel of how such a merger could create a "world-class" new Fleming. Bob's haste to get to New York (and his willingness to talk with SN editors so quickly after the deal was made known) is emblematic of how fast the whole buyout agreement was put together. Incidentally, much of what Bob and Fleming's Harry L. Winn Jr., executive vice president and chief financial officer, and John M. Thompson, vice president and treasurer, had to say is reflected in the front-page article of this issue written by Retail-Financial editor Mark Tosh.

But let's let Bob Stauth describe the anatomy of the Fleming-Scrivner deal and the speed with which it unfolded. "Here's what happened," Bob told us. "Jerry Metcalf [Scrivner's chairman and chief executive officer] gave me a call one day and said his company was considering selling. He said there will be several bidders on the business. "It was just two months ago Jerry said that to me. I told him that we would look at it and do some work. Then we brought Merrill Lynch aboard to help us do the analysis. "Before long, we submitted our bid and it was on time. There were four bids at that time. I don't know that Fleming's was the highest, but Fleming had the highest probability of being able to close on the deal in a very short period of time." Fleming's bid was accepted and the pace of events quickened.

"We then put 24 people on due-diligence for three solid weeks, literally day and night, and we found absolutely nothing in the Scrivner arsenal that would tell us the original bid price was unfair. It met, by far, the model for acquisitions. We bought it at 6.3 times EBITDA, while the industry standard is about 7.1, so we were well within the frame of calling it a fair price." Needless to say, since all seemed in order, the agreement was authorized and made public last week. It develops that apart from the obvious benefits size confers to any food distributor, the Scrivner buy will do much to move Fleming toward its strategic goal of achieving a higher percentage of its top line from directly controlled retail sales. There's another strategic intent to Bob's efforts: To signal that Fleming will move quickly to achieve the synergies that are possible in the union of the two wholesalers, unlike Fleming's past post-buyout practices.

The buyout proposal also signals that a new day has dawned at Fleming: "Our division presidents have said, 'Hey, we need to make a difference at Fleming; we can't go on with business as usual and be a leader in our industry,' " Bob said. "'We're going to have to find a new way to do things.' "

The buyout activity and Fleming's already-known re-engineering goals certainly add up to that "new way."

By the way, readers of SN won't be too surprised at the proposed Fleming-Scrivner deal since the possibility of it was the subject of a front-page article in SN's May 23 issue. Predictions in that article were fundamentally on target, except for the supposition that a deal might involve Scrivner or its parent company ending up with 30% of Fleming's equity. It turns out that no equity swap was ever under consideration.