BOWLING GREEN, Ky. -- Houchens Industries here moved to further diversify its portfolio of holdings last week with the planned acquisition of Food Giant Supermarkets, Sikeston, Mo., which operates 90 conventional supermarkets in eight states, primarily in the Midwest.
Houchens is the nation's largest Save-A-Lot licensee with about 200 outlets in 11 states from Texas to New York, and it also operates subsidiaries in the warehousing, construction, recycling, insurance and cigarette industries. Its retail holdings also include about 40 conventional supermarkets, mostly under the Houchens banner.
"It is probably good for both companies," said Jimmie Gipson, chairman and chief executive officer, Houchens, in an interview with SN last week. "It helps diversify us even further, and it helps diversify them."
Terms of the acquisition were not disclosed. Completion of the transaction, scheduled to occur by July 3, is contingent upon negotiation of definitive agreements and an independent appraisal of the two companies' stock. Both companies are employee-owned.
Houchens said it has annual sales of about $1.5 billion. Food Giant, which operates primarily under the Food Giant and Piggly Wiggly banners, has annual sales of about $400 million, Houchens said. Food Giant will continue to be operated by current management after the acquisition.
Gipson said that although the two companies operate in the same general region of the country, there are only about six or seven areas where their stores are close to each other. He said he sees few opportunities for synergies between the companies. Instead, the acquisition was driven by both companies' desire to further diversify their businesses.
"There are probably some [efficiencies]," Gipson said. "It's possible that our insurance agency could be able to fill their needs, and there's probably some repair and maintenance issues where we might be closer to their stores than they are, and we might be able to help out, but there are no expected big synergies. It's something we feel that will develop over a period of time."
While most of Houchens' stores tend to be under 20,000 square feet, Food Giant operates some stores in the 10,000-to-12,000-square-foot range and others that are in the 35,000-to-40,000-square-foot range. Food Giant's stores will continue to be supplied by their current suppliers, which include Associated Wholesale Grocers, Kansas City, Kan., and Piggly Wiggly Southern, Birmingham, Ala. Houchens' primary suppliers are Roundy's, Milwaukee, for its traditional stores, and Supervalu, Minneapolis, for its Save-A-Lots.
Houchens has been testing the conversion of some stores to the IGA and IGA Express format. Two traditional stores and one convenience store have been converted so far. Gipson also said Houchens is preparing to begin testing a new, 10,000-square-foot rural format called Crossroads in Warren County, Ky.