JITNEY SEEKS LARGER CHAIN FOR MERGER TO HELP GROWTH

JACKSON, Miss. -- Jitney-Jungle Stores of America here said last week it would seek to merge with another supermarket-industry player in a bid to remain competitive and to facilitate growth.The move marks the second time in three years Jitney has been for sale."Our plan is to continue to grow our presence in the Deep South by hooking up with someone with greater financial wherewithal," Michael E.

JACKSON, Miss. -- Jitney-Jungle Stores of America here said last week it would seek to merge with another supermarket-industry player in a bid to remain competitive and to facilitate growth.

The move marks the second time in three years Jitney has been for sale.

"Our plan is to continue to grow our presence in the Deep South by hooking up with someone with greater financial wherewithal," Michael E. Julian, chairman and chief executive officer of the 197-store chain, told SN last week.

"We're looking for a larger player who may not have a presence here and who's interested in operating in this part of the country -- and someone who has the ability to provide capital to enable us to stay competitive.

"Other mid-sized regional chains like ours have realized substantial financial and strategic benefits from merging with larger supermarket operators, and we believe a new alliance will accelerate our ability to take advantage of the numerous opportunities to build and expand this successful franchise."

Observers said Jitney's selling price, based on cash flow, could range from $950 million to $1.2 billion.

In other developments last week:

Jitney met with vendors to discuss its strategic plans.

The company said it completed a supplemental credit facility of $35 million.

Jitney's eventual strategic partner will not have to retain the Jitney name, Julian said, though he thinks the name has a lot of value.

The previous sale of Jitney occurred when the chain's founders sold the company in 1996 to Bruckmann, Rosser, Sherrill & Co., a New York-based investment firm, for $373 million.

To make the purchase, investors took on $200 million in longterm debt, then added another $200 million in debt when the chain purchased approximately 100 stores from Mobile, Ala.-based Delchamps in 1997. Current debt is approximately $545 million, observers said.

According to Julian, Jitney has not yet had talks with any potential merger partners and is unable to pinpoint the timing of a merger.

"We don't have any particular urgency to make a deal right away," he said. "Our ability to keep going is limited by our capital structure, and while we don't want to fall dramatically behind, we're not in a position where we need to be bailed out."

He said Jitney had considered various strategic options, including a public offering or additional financial equity. "We're not a cash-starved company. There's plenty of cash flow to service our debt but not enough to service the debt and also to grow at the rate of capital spending we need.

"The industry today requires significant capital to keep up with the Joneses, but after servicing our debt, there's not enough volume to keep our cap-ex program at the level we want it to be, though we can survive for a long time at this level."

Ted Bernstein, a high-yield securities analyst with Grantchester Securities, New York, told SN he believes two potential partners for Jitney could be Supervalu, the Minneapolis-based distributor, and Food Lion, Salisbury, N.C. -- "Supervalu because it's already doing business with Jitney and because it has a retail presence and Food Lion because it has decided to grow through acquisition."

Another analyst, who asked not to be identified, said he thought two Jitney competitors -- Albertson's, Boise, Idaho, or Kroger Co., Cincinnati -- might make good partners.

The same analyst also said it seems unusual for a company to announce it is seeking a merger partner.

"That's usually done behind closed doors. But it may have the effect of creating a frenzy among potential partners, or it could prompt certain players who smell blood to make a bid lower than they otherwise might."

Consolidating

JACKSON, Miss. -- Jitney-Jungle Stores of America here said last week it is consolidating four operating regions into two.

The company said the realignment combines Jitney's northern and central regions into a single northern region and combines its southwest and southeast regions into a southern region.

The realignment also features a number of personnel changes:

Jeff Thomas, formerly senior vice president for the southwest region, has been named senior vice president and general manager of the southern region, a new position. He reports to Ronald Johnson, president and chief operating officer.

Clint Williams, formerly senior vice president for the southeast region, has been named senior vice president and general manager for the northern region, a new position. He also reports to Johnson.

Dennis Smith, formerly vice president of operations for the southwest region, has been named vice president of operations for the southern region. He reports to Thomas.

Dave Harmon, formerly corporate vice president for labor scheduling, has been named vice president of operations for the northern region, reporting to Williams.

Tim Tuttle, formerly vice president for store administration, has been named senior vice president for information systems, succeeding Dane Truett, who has left the company. Tuttle reports to Johnson.

B.J. Mehaffey, formerly vice president of operations for the central region, succeeds Tuttle as vice president for store administration, reporting to Johnson.

John Zeller, formerly vice president of operations for the northern region, has been named district manager for the Little Rock, Ark., and Memphis, Tenn., operations within the northern region. He reports to Williams.

Dennis Cooper, formerly head produce buyer, has been named vice president of produce operations, reporting to Steve Harmon, executive vice president of merchandising.