OKLAHOMA CITY -- Homeland Stores here last week agreed to sell 29 of its stores and its warehouse facility to Associated Wholesale Grocers, Kansas City, Kan., and will subsequently become a member of that co-op with its remaining 82 units.
The deal, which is scheduled to close around May, will lead to a major increase in the business of AWG, which is expected to become the fourth-largest U.S. wholesaler following consummation of the transaction.
The move also will give a needed cash infusion to Homeland -- which also named a new chief executive officer -- and enable that chain to improve its financial position and refocus itself on retail while leaving supply arrangements to AWG, Robert Mead, spokesman for Homeland, told SN. AWG will pay Homeland $45 million plus the value of inventory in the warehouse and the 29 stores. All but five of the 29 units are in Oklahoma, with the remainder in Kansas.
AWG will add 111 stores to its supply network. These include the 29 units, which are expected to be spun off to independents, and the remaining 82 units in the Homeland chain, which will be covered under a seven-year supply arrangement, said Beth Danes, AWG spokeswoman. Homeland announced that Max Raydon, president and CEO, has resigned after seven years in those positions.
James A. Demme, most recently executive vice president of marketing for the Fleming Retail Group at Fleming Cos.,
Oklahoma City, has been named Homeland president and CEO effective immediately. Raydon will serve as a consultant during the transition. Demme's former position at Fleming hasn't been filled as of last week, said a Fleming spokeswoman.
AWG will establish a third wholesale division to be located in Oklahoma City as a result of this deal, Danes said. The company currently operates divisions in Kansas City and Springfield, Mo. AWG, whose co-op includes 735 independents and posts volume of more than $2.6 billion, expects revenues to rise to more than $3 billion in 1995 as a result of the transaction, Danes said. However, the Homeland deal will only take effect about halfway through that year, so its total effect on revenues won't be experienced until 1996.
Homeland, which posted volume of $809 million in 1993, is the leading supermarket chain in Oklahoma, southern Kansas and the Texas Panhandle region. It is closely held by a management-led group and Clayton, Dubilier & Rice, a New York-based buyout firm. Homeland was created in late 1987 when Safeway, Oakland, Calif., sold its Oklahoma division to Clayton. Homeland has been hurt in recent years by a tough economy and aggressive supermarket and discounter competition, Mead said. However, this deal will improve buying economies, reduce debt and free Homeland from high fixed costs, he added.
Mead said the company is still continuing additional restructuring moves that he wouldn't specify, but said the AWG deal is the biggest piece of the plan.
Mead said he didn't expect any problems with the closing of the deal because the two parties have prepared very carefully.