DELHAIZE AWAITS HANNAFORD FTC REVIEW

DAVID GHITELMAN

Delhaize America, Salisbury, N.C., said it would continue its efforts to acquire Hannaford Bros., Scarborough, Maine, even if the Federal Trade Commission required Delhaize to sell off all the Hannaford stores in the Southeast.

In August, Delhaize announced it had worked out a deal to purchase Hannaford for $3.6 billion. The acquisition, approved by Delhaize shareholders in September and Hannaford shareholders earlier this month, is currently under FTC review.

At the Donaldson, Lufkin & Jenrette Annual Food & Drug Retailing Conference, Laura Kendall, Delhaize's chief financial officer, said, "even if we were to see [the FTC require] a clean sweep of Hannaford in the Southeast," Delhaize would still pursue the acquisition. "That's not an important part of the deal."

She also termed the company's dealings with the federal regulators as taking place within "a good, cooperative environment."

Out of its total 154 units, Hannaford has 49 in the Southeast -- in North and South Carolina and Virginia. Food Lion, Salisbury, N.C., Delhaize's largest division, is a dominant player in the region.

Joseph Hall, Food Lion president, told the conference Delhaize wants to acquire Hannaford because "it is the premier grocery operator in the small-market industry." Hannaford has "no debt, a premium store base and outstanding management," Hall added.

He said he expected the FTC to approve the acquisition and for the deal to close by the end of the first quarter. He also said Delhaize anticipated synergies of $75 million a year in the first three years from the takeover, principally from gross margin improvements.

"We're not going to go in and cut cost structures," he said. "We're looking at how we can make a good operation better from both sides. We have a lot to learn from them."

As for Food Lion, Hall said it "will continue its successful formula," featuring "low price leadership," centralized purchasing and encouraging the use of customer loyalty cards, which were involved in 74% of purchases last year. "We are very pleased with that result," he added.

And at the company's Tampa, Fla.-based Kash n' Karry division, Hall said Delhaize was taking advantage of its conversion of 51 Food Lions in Florida to the Kash n' Karry banner to remodel about half those units.