WHEN KKR BIDS, PEOPLE LISTEN

ELLIOT ZWIEBACH

NEW YORK -- Despite a host of investment rivals, Kohlberg Kravis Roberts & Co. here is regarded as the top of the line by industry observers. "KKR is like an alchemist who creates gold out of base metals," Jonathan Ziegler, an analyst with Salomon Bros. here, declared. "It's able to take two plus two and make it equal five. "Fred Meyer, Safeway and Stop & Shop were all good companies that needed some fine-tuning, and KKR knew where to go to find people who could make those assets more productive. "There's an aura about KKR, and the companies it owns have the utmost respect for what KKR brings to the table." Gary Giblen, managing director of Smith Barney here, expressed similar thoughts. "KKR is the creme de la creme of buyout investors," he said. "It finds companies that are undervalued and that can be improved, and then it proceeds to make those improvements by bringing in strong managers and spending capital." When KKR goes after a supermarket acquisition, it's usually not the only potential buyer. On one deal or another its rivals have included several of the following:

Yucaipa Cos., Los Angeles, whose investments include Dominick's Finer Foods, Northlake, Ill.; Smitty's Super Valu, Phoenix; Food 4 Less Supermarkets in northern California and the Midwest, and Food 4 Less Supermarkets, La Habra, Calif. (whose merger with Ralphs Grocery Co., Compton, Calif., is imminent).

Freeman Spogli & Co., Los Angeles, owners of Buttrey Food & Drug Co., Great Falls, Mont., and a previous investor in Purity Supreme, North Billerica, Mass.; A.J. Bayless Markets, Phoenix; Boys Markets, Los Angeles; Piggly Wiggly Southern, Vidalia, Ga.; P&C Foods, Syracuse, N.Y., and Tops Markets, Buffalo.

Leonard Green & Partners, Los Angeles, which owns a majority stake in Carr Gottstein Foods Co., Anchorage, Alaska, and has previous investments in Kash n' Karry Food Stores, Tampa, Fla., and Almac's, Providence, R.I.

Merrill Lynch Capital Partners, New York, which owns Pathmark Stores, Woodbridge, N.J.

Acadia Partners, New York, which owns Harvest Foods, Little Rock, Ark.

Clayton Dubilier, New York, which owns Homeland Stores, Oklahoma City.

Odyssey Partners, New York, which owns Abco Foods, Phoenix, and Eagle Food Stores, Milan, Ill.

Dart Group Corp., Landover, Md., which owns Shoppers Food Warehouse Corp., Harrisburg, Md.

Thomas Lee Co., Boston, which owns Big V Supermarkets, Florida, N.Y. According to observers, one of the major differences among the top four players is that KKR, Freeman Spogli and Leonard Green typically have a single fund from which they make their investments, while Yucaipa establishes separate funds for each acquisition, with different groups of partners involved in different deals. In addition, Freeman Spogli tends to move in and out of its investments quicker than some of its competitors, observers pointed out. According to Giblen, "KKR isn't a group of quick-buck artists trying to squeeze as much as it can out of a business, and it's not looking for short-term fixes. "It makes selective management changes where new strategies and approaches are needed, but it doesn't recklessly change corporate cultures. "Some buyout firms make the companies they own conserve cash to create a cushion to repay debt, but that only compromises a company's competitive position. KKR's goal is to build and strengthen a business with investments in [capital expenditures]."