GREENVILLE, S.C. — The “For Sale” signs are back up around Bi-Lo, sources told SN last week.
The chain, which recently emerged from Chapter 11 bankruptcy protection, has drawn interest from competitors Kroger Co. and Publix Super Markets, one source told SN, although a spokeswoman for Lakeland, Fla.-based Publix dismissed that claim as “a rumor.”
“Publix is not actively engaged in the purchase of Bi-Lo or Bi-Lo stores,” Maria Brous of Publix told SN. A spokesman for Cincinnati-based Kroger was not immediately available for comment.
Bi-Lo is owned by Lone Star Funds, a Dallas-based private equity investor. Lone Star retained control of the chain during a 13-month restructuring under Chapter 11 bankruptcy that ended in May. Delhaize Group's Food Lion chain had made an offer to acquire Bi-Lo during the bankruptcy process, but a source told SN last week it was unknown whether Delhaize would bid again.
Lone Star, which acquired Bi-Lo from Ahold in 2005, said in court that it had marketed the chain for sale before the bankruptcy filing, but had been unable to sell it.
Lone Star declined to comment last week.
Bi-Lo operates 207 stores in four states. Based on unaudited figures filed recently with U.S. Bankruptcy Court, Bi-Lo had sales of $1.21 billion during the six-month period that ended June 19, up slightly from a year ago. Bi-Lo earned $25.4 million over that period, swinging from a loss of $5.4 million during the same six months in 2009. EBITDA of $46.2 million was up slightly from $43.9 million.
Bi-Lo filed for Chapter 11 in March of 2009 after failing to refinance a bank loan and reeling from declining sales and margins. The company closed several stores, renegotiated a supply contract with C&S Wholesale and emerged in April behind new financing and a new equity investment by Lone Star.
Delhaize's Food Lion division in October revealed it had offered to buy the company out of bankruptcy for $425 million in cash. Sources then told SN that Delhaize was “buying the sales” with a plan to operate around 75% of the stores and profit from economies of scale when combined with the larger Delhaize organization. But that offer was based on contingencies that were not met during the bankruptcy process.
Burt P. Flickinger III, managing director of Strategic Research Group, New York, predicted last week that Lone Star could have more trouble selling Bi-Lo, citing economic conditions affecting valuations.
“We know there were people interested in paying a good price for Bi-Lo at one time, but deflation, leading to lower same-store sales and profit pressure, gives a higher degree of difficulty for Lone Star to get a full-price bid,” Flickinger said. “Valuations as a multiple of EBITDA are down 50 to 150 basis points.”
