Tuesday, November 02, 1999
Kroger to buy 74 stores from Winn-Dixie
Texas market attractive
BY LISA BIANK FASIG
The Cincinnati Enquirer
The Kroger Co. has agreed to acquire 69 Winn-Dixie stores in Texas and five in Oklahoma, a strategy to reduce costs and significantly enhance the chain's penetration in one of its key markets.
Forty-three of the stores operate in the Dallas-Fort Worth region, where Kroger operates 65 of its 169 Lone Star locations. The deal also calls for Kroger to buy a dairy in Fort Worth from Winn-Dixie.
Kroger and Winn-Dixie declined to disclose the sale price. The transaction, if approved by government regulators, would be in cash.
“Texas, and Dallas/Fort Worth in particular, have become a very competitive marketplace for grocery companies nationally,” said Gary Rhodes, a spokesman for Kroger. “By acquiring Winn-Dixie stores in Texas, we can significantly strengthen our position in the Dallas/Forth Worth metroplex.”
The pending deal would be the fourth notable acquisition by Kroger this year, as the enormous chain selects buying opportunities that let it capitalize on existing operations and affordably expand into lucrative markets. Since May, Kroger acquired the 1,200-store Fred Meyer chain; 41 Albertson's Inc. stores in northern California; and the 27-store John C. Groub Co. Inc. chain in southern Indiana.
The deal with Winn-Dixie would make Kroger the largest grocery store operator in the Fort Worth market and put it on equal footing with the largest operators in Dallas. In all, Kroger would operate close to 2,300 grocery and multidepartment stores in 31 states.
“Obviously, Texas is a major market for them to expand in,” said Tony Howard, an analyst covering Kroger for J.J.B. Hilliard, W.L. Lyons, a Louisville-based brokerage firm. “Kroger probably got them for a relatively good price.”
Winn-Dixie has posted declining profits for several years. From 1996 to 1999, net income has dipped to $182.3 million from $255.6 million.
In a statement, Winn-Dixie said it would sell the stores so it can focus on core markets that bring a greater return on investment. Mickey Clerc, company spokesman, said Winn-Dixie operates divisional headquarters in Louisville (which covers Cincinnati operations), Atlanta, Alabama, New Orleans, North Carolina (two) and Florida (four). Florida, where Winn-Dixie is based, is the chain's largest market.
The deal involves roughly 9,000 Winn-Dixie workers, substantially all of whom are expected to be offered employment through Kroger.
A separate warehouse management company will acquire a Winn-Dixie distribution center in Fort Worth.
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