RICHFOOD'S SEARCH FOR A SUITOR

RICHMOND, Va. -- Richfood Holdings here had to deal with a series of frogs before it met its prince, Minneapolis-based Supervalu.ood had discussions with several potential suitors before it settled on Supervalu.Richfood said it conducted a review of its strategic options from early 1998 through early 1999 and initiated contacts with several potential acquisition targets, none of which ended in an

RICHMOND, Va. -- Richfood Holdings here had to deal with a series of frogs before it met its prince, Minneapolis-based Supervalu.

ood had discussions with several potential suitors before it settled on Supervalu.

Richfood said it conducted a review of its strategic options from early 1998 through early 1999 and initiated contacts with several potential acquisition targets, none of which ended in an acquisition transaction.

During the second half of 1998 Richfood said it was also negotiating with Giant Food Stores, Carlisle, Pa., its largest wholesale customer, to extend a supply agreement scheduled to expire at the end of 1999.

According to the proxy, Giant told Richfood last January it was prepared to enter into a new long-term supply agreement, but when its parent company, Ahold USA, Atlanta, made other arrangements, it told Richfood it would not extend the agreement.

That same month, the proxy indicated, a company "in the retail business" contacted Richfood on an unsolicited basis regarding a possible business combination, signed a confidentiality agreement and conducted due diligence, but by February the potential partner said it was no longer interested.

Because of the uncertainties regarding Giant and the unsolicited acquisition contact, John E. Stokely, Richfood's chairman, president and chief executive officer, decided to contact Mike Wright, chairman, president and CEO of Supervalu, to ascertain whether there was any interest in exploring a possible merger, the proxy said.

According to the proxy, Stokely viewed Supervalu as "the most compelling strategic partner for Richfood in light of [its] position as the largest grocery wholesaler in the United States, its successful expansion of its retail grocery operations, its financial strength, the absence of substantial geographic overlap of Supervalu's wholesale or retail operations with those of Richfood and the common business philosophies of the two companies."

Stokley and Wright had their first meeting in early March, the proxy said, and agreed to maintain contact and continue discussions.

On March 30 the two companies signed a confidentiality agreement, and Supervalu conducted due diligence throughout the month of April, including a review of financial projections reflecting the loss of the Giant account, the proxy said.

At the end of April, Richfood said, its directors authorized Donaldson Lufkin & Jenrette, New York, to study Richfood's strategic alternatives and authorized management to continue confidential discussions with Supervalu.

On May 7, Wright told Stokley Supervalu was interested in a possible merger, the proxy noted.

However, on April 30, another unnamed company in the retail food business contacted Richfood on an unsolicited basis to express interest in a possible business combination, the proxy said, and the two companies entered a confidentiality agreement on May 11.

Ten days later the retailer told Richfood it was interested in a possible merger, according to the proxy. However, Richfood and DLJ representatives determined there might be regulatory issues that would impair the third party's ability to successfully complete an acquisition, and on June 7, the third party indicated it was no longer interested in pursuing a transaction, the proxy indicated.

According to the proxy, Richfood received two other unsolicited inquiries from wholesale and/or retail companies in May. However, while one party executed a confidentiality agreement but did not commence due diligence, the second party did neither, the proxy said.

At Richfood's request DLJ initiated contacts in late May with two national retail grocery companies, which the proxy did not specify, and confirmed that neither was interested in a possible acquisition of Richfood.

On May 19, DLJ spoke to the Richfood board, the proxy noted, about possible strategic alternatives to increase shareholder value, including an operational reorganization, the sale or spinoff of either or both of Richfood's wholesale and retail divisions and the sale of the entire company.

The proxy said the board also reviewed the buyout offers from parties other than Supervalu and determined those potential acquirers faced financial, regulatory or strategic impediments that would impair their ability to consummate a transaction on terms comparable with Supervalu's offer.

On May 21, Supervalu confirmed its willingness to acquire Richfood for $18.50 per share and subsequently initiated a detailed due-diligence procedure that continued through June 4, the proxy said.

Negotiations between the two companies began that day, the proxy said, and a merger agreement was executed and made public on June 9. The merger was completed Aug. 31.