AWG TO BUY AFFILIATED FOOD STORES ASSETS

ELLIOT ZWIEBACH / Additional reporting: MICHAEL HARRISON

KANSAS CITY, Kan. -- Associated Wholesale Grocers here said last week it has signed a letter of intent to acquire the assets of Affiliated Food Stores, Tulsa, Okla.

AFS will hold a series of meetings over the next few weeks with its members to explain the proposal and to vote on the transaction. Bob Rippley, AFS president and chief executive officer, told SN "it will probably take most of April" to tally the votes of the co-op's 920 members.

"We have to reach the ones that don't make it to the area meetings," he said.

Doug Carolan, AWG president and CEO, told SN that AWG's board has already given preliminary approval to the transaction.

AWG is a retailer-owned wholesaler with distribution centers in Fort Scott, Kan.; Springfield, Mo.; Oklahoma City; and here. It serves more than 800 stores throughout a 10-state area, with 1998 sales of $3.2 billion. AFS is a member-owned cooperative with distribution centers in Tulsa and in Abilene, Texas, and would become, post-merger "a small [store] distribution arm of Associated," Rippley said.

It's unclear how the co-ops' boards would mesh after a consolidation, but Rippley said AFS' "staff will remain intact." He also said he is unsure what his title would be although "I will have a leadership role" in the combined co-op.

AFS, which began in 1939, serves approximately 100 supermarkets and 650 convenience stores, with the rest of the members falling into a retail food channel Rippley described as "other." Serving Oklahoma, Arkansas, Kansas and Texas, the co-op reported 1998 sales of approximately $300 million.

Rippley said that of 1,200 stores supplied in total by AFS, 965 units "account for less than $1,500 a week" in sales.

Carolan said AWG became interested in acquiring AFS because of its convenience-store business. "That's a distribution channel that we're not in, and this transaction would give us an opportunity to enter that channel and cultivate it," he explained.

The primary synergy of the two co-ops merging "is buying power," Rippley said. "We're excited about the opportunities that abound." He added that an AFS plan to try and convince its convenience store -- and other small-store members -- to operate under a single banner would go forward regardless of a merger with AWG.

With most of AFS' volume coming from Oklahoma, Carolan said, the acquisition would be particularly beneficial to AWG's Oklahoma division, which currently accounts for 20% of the cooperative's total volume.

Carolan said AWG continues to look for potential merger partners, "but we have no other potential transactions in prospect right now."