WINN-DIXIE AGREES TO BUY THRIFTWAY

GLEN A. BERES

CINCINNATI -- Winn-Dixie Stores is expanding its reach in the Midwest -- deep into the heart of Kroger Co. territory.

The Jacksonville, Fla.-based company has reached an agreement with Thriftway here to acquire the food and drug retailer's 25-store operation. All of Thriftway's stores are in the Greater Cincinnati area.

Terms of the agreement were not disclosed. Observers said the deal is to be a stock transaction, most likely valued between $150 million and $200 million.

The deal, subject to regulatory approval, is expected to be consummated in late March, Mickey Clerc, vice president of public relations at Winn-Dixie, told SN. "We'll close the stores for one day, take a physical inventory and reopen the next day," he said.

Winn-Dixie's new Thriftway division -- which securities analysts said is likely to be folded into its Louisville, Ky., division -- would consist of two conventional supermarkets and 23 food and drug combination stores averaging 48,000 square feet and generating an estimated annual volume of $400 million to $450 million.

The package also would include two additional Thriftway sites scheduled to open this year, which Clerc said Winn-Dixie will evaluate.

"Thriftway stores fit Winn-Dixie's strategic direction of operating large, full-service supermarkets," said James Kufeldt, Winn-Dixie president, in a statement. "No changes in the retail operations are planned at this time."

Thriftway officials could not be reached for comment.

Clerc said Winn-Dixie has not decided who would run its newest division. Observers said that Richard E. Lindner, Thriftway founder and chief executive officer, would step down. Clerc also said the company plans to retain Thriftway's 4,000 retail store employees.

Winn-Dixie is the nation's fifth-largest supermarket chain, with 1,159 stores in 13 states and an annual volume of $11.1 billion.

Although the retailer already has a small Midwestern presence in Indiana, the acquisition would mark Winn-Dixie's first foray into Ohio. Rival Kroger Co. is headquartered here and dominates the market, according to observers. Ed Comeau, senior vice president at Lehman Bros., New York, said the greater Cincinnati market will get much more competitive over the next year, with Grand Rapids, Mich.-based Meijer Inc. expected to open several stores there as well. But the Thriftway units are "well-run stores with a good reputation" and Comeau said they will continue to hold their own against Kroger, Meijer and other competitors.

"Thriftway's a pretty good operation," Comeau said. "Kroger really respects them. [Thriftway's] done well there and I don't think Winn-Dixie will tinker with those stores too much."