MECHANICSVILLE, Va. -- Richfood Holdings' acquisition of Super Rite Corp., Harrisburg, Pa., is expected to be completed this week following approval by the two companies' boards late last week.
Executives of Richfood here outlined plans for the combined entity at the company's annual meeting last week. Those plans include an expansion of retail properties owned by Super Rite, major gains in perishables business, synergy moves for private-label buying and enhancing transportation and logistics capabilities. Super Rite is to become a wholly owned subsidiary of Richfood Holdings in a $320 million deal that will make Richfood the nation's fourth-largest wholesaling company. Its customer base will extend from New Jersey to South Carolina. Shareholders of Richfood and Super Rite separately approved the previously disclosed merger, and the results were announced at Richfood's annual meeting. "Today's meeting, with our approval
of the Super Rite acquisition, is an important landmark for Richfood," Donald D. Bennett, chairman and chief executive officer of Richfood Holdings, told about 80 shareholders and company officials. "The decision made here today doubles the size of our company -- going from a sales base of $1.5 billion to over $3 billion."
John E. Stokely, president and chief operating officer of Richfood Holdings, stressed the synergies and growth opportunities that will come to Richfood through the merger.
"The transaction you have just approved creates the Mid-Atlantic's leading wholesale food distributor in terms of size, sophistication and performance," he said. "[The acquisition] will take two of the lowest-cost providers of goods and services in the industry and combine them into a regional distribution and logistics powerhouse."
Under the new corporate structure, Alex Gross remains chairman and CEO of Super Rite, and Peter Vanderveen remains president and chief operating officer.
Under the terms of the merger, Richfood will issue 1.02 shares of its common stock for each of the approximately 9.6 million outstanding shares of Super Rite common stock. Former holders of Super Rite common stock will now hold about 31% of the outstanding common stock of Richfood.
According to Stokely, some of the growth opportunities now available to Richfood as a result of the Super Rite acquisition include:
Picking up Super Rite's 240-store retail customer base, which, combined with Richfood's 1,500-store retail customer base, means the new Richfood will serve most of the region's leading chains.
Acquiring Super Rite's 15-store retail operation -- 10 Metro superstores and five Basics supermarkets in the Baltimore area -- with plans to expand the Metro chain.
Developing a new private-label line for Super Rite and expanding the private-label capabilities of Richfood and Super Rite.
Increasing Richfood's perishables business, particularly in the areas of produce and meat.
Leveraging transportation and logistics fleets of both sides to provide more products with greater efficiency to customers.
The new Richfood's leading retail customers will include Giant Food Stores, Carlisle, Pa.; Farm Fresh, Norfolk, Va.; Shopper's Food Warehouse, Washington; Ukrop's, Richmond, Va.; Metro in Baltimore; IGA stores throughout Virginia; Genuardi, Norristown, Pa.; Redner's, Reading, Pa., and Camellia, Norfolk, Va., as well as other independents and smaller chains.
These leading chains should provide Richfood with ample growth opportunites -- according to Stokely, they are scheduled to open more than 30 stores combined over the next fiscal year.
Commenting on Super Rite's retail operations, Stokely said Richfood intends to expand the Metro format. The Metro units, typically 55,000 to 60,000 square feet, emphasize service and perishables and are considered "value leaders" in the Baltimore market, he said. Richfood will convert two Basics stores as well. The company is also planning to build at least three new Metro units in the region in the near future, he added.
Richfood foresees significant growth in its perishables business as a result of the merger. Richfood will look to market its strong produce offerings to existing Super Rite customers. "Already, we are servicing the Metro stores out of our facility in Richmond," he said. "This was business that was previously serviced by an outside third party. We will look to exploit additional produce opportunities in the future."
Richfood also intends to strengthen Super Rite's meat business through Richfood's subsidiary, Rotelle, which was acquired in August 1994 and manufactures value-added meat products out of its West Point, Pa., meat-cutting facility. "We are finding a tremendous acceptance of our meat among retail customers," Stokely said. "I think there is opportunity to sell additional product of this type to Super Rite's existing customers."
On the private-label side, Stokely said, the merger with Super Rite gives Richfood added purchasing power and will help beef up both business's private-label operations. He did not elaborate on the new label the company is developing for Super Rite.
Enhanced transportation and logistics capabilities were another attractive aspect of the acquisition for Richfood. Stokely noted that there is some geographical overlap in marketing areas for Richfood and Super Rite, and the combination of the two companies will allow the new Richfood to "ship the same or greater volume of product with less transportation equipment, which translates into a lower cost of operations for both our retailers and our shareholders."
Warehouse capacities can be better used as well with the addition of Super Rite. Stokely said that Richfood's 1.3 million-square-foot Richmond facility is operating at only 80% capacity. Rotelle's 195,000-square-foot grocery warehouse is 75% used, while its 200,000-square-foot frozen food facility is "tight on frozen food space.