URM STORES HOPES TO REACQUIRE ROSAUERS

JON SPRINGER

SPOKANE, Wash. -- URM Stores, the wholesale cooperative here that sold Rosauers Supermarkets to its employees 10 years ago, said last week it wants to reacquire the chain.

Rosauers, also based here, operates 19 Rosauers Food & Drug and Super 1 Foods stores in Washington, Idaho, Oregon and Montana. The deal, subject to the approval of Rosauers shareholders, is set to be completed in early May, the companies said.

URM Stores owned Rosauers from 1984 until 1990, when it sold the stores to an employee stock-ownership plan. That agreement allowed Rosauers employees to set aside wages to reach the $25.5 million purchase price.

The companies did not disclose a selling price for this deal, but Larry Geller, Rosauers president and chief executive officer, said in a statement the transaction would provide Rosauers employees with a "substantial return on their original investment."

Greg Tarr, president and CEO of URM, told SN that he could discuss the deal in greater detail after the employee-owners vote in May. "Both parties have signed a letter of intent," Tarr said. "That's pretty much the extent of what I can say about it now."

An industry observer told SN the deal is a defensive move by URM, which is under intense pressure to hold onto its customers in an increasingly competitive wholesaling environment.

"The wholesaler is acquiring its best customer to protect a loss of market share," said Jeff Menashe, food and agribusiness director at Exvere, a Seattle-based private investment bank that specializes in the food industry. "I suspect that Rosauers was being courted by some other players and URM was forced to step up to the plate. If they lost that business it would be devastating to URM."

Menashe estimated that Rosauers does about $300 million in annual sales and described the chain as a small-scale "QFC of eastern Washington," referring to the Portland, Ore.-based independent that was acquired by Fred Meyer Inc., also of Portland, in 1998. Fred Meyer was in turn acquired last year by Kroger Co., Cincinnati.

URM serves 150 member-owners and 1,500 accounts in Washington, Oregon, Montana and Idaho. Its annual revenues are estimated at about $500 million.

Independents like URM and Seattle's Associated Grocers will have to fight to keep their business as retail consolidation takes away customers and wholesalers also pair up for greater strength, Menashe said. The recent merger of United Grocers, Portland, Ore., and Certified Grocers of California, Los Angeles, to form Unified Western Grocers, Los Angeles, will affect independents throughout the Western states, he added.

"The question for URM is can they can stay independent," Menashe said.

Rosauers was founded in 1934 and remained under family ownership until URM Stores purchased it in 1984. Its sale to Rosauers employees in 1990 sparked some controversy. Albertson's and Safeway, which had negotiated the same contract as Rosauers with the United Food and Commercial Workers Union, accused Rosauers and the union of gaining an unfair advantage through cheaper labor costs, reports said.

That eventually became a central issue in a UFCW strike against Safeway in 1990. Albertson's filed a lawsuit over the matter in 1991 that was eventually settled out of court, reports said.