MINNEAPOLIS — Nash Finch Co. here last week said it has agreed to purchase three distribution centers serving military commissaries and exchanges from GSC Enterprises for $80 million in cash.
The deal will allow Nash Finch to expand its military distribution network, particularly in the Southern and Midwestern states. The facilities are located in Pensacola, Fla.; Junction City, Kan.; and San Antonio.
According to figures provided by GSC, the centers accounted for approximately $740 million in revenue for the 12 months ended in October.
Nash Finch's current military distribution segment produced $1.25 billion in sales for the fiscal year ending Dec. 27, 2007. In a conference call announcing the deal last week, Alec Covington, president and chief executive officer of Nash Finch, said the military is the company's most consistent provider of sales and EBITDA growth and historically has provided the company's best returns on invested capital.
Expanding through GSC's facilities, he said, will allow for further growth as called for in Nash Finch's strategic plan, while improving the profitability of those facilities should provide superior returns over time.
“When all is said and done, we expect to realize an internal rate of return of at least 13%,” Covington said. He said Nash Finch would accomplish this over the next three years by continuing a slate of initiatives currently under way through GSC; by enhancing product lines; and by improving efficiency through combined distribution networks.
GSC, based in Sulphur Springs, Texas, will retain its convenience store distribution and financial services business segments. The deal is subject to regulatory approval, and is expected to close in the first quarter.
Nash Finch's military distribution segment, known as Military Distributors of Virginia (MDV), consists of facilities in Norfolk, Va., and Jessup, Md. That segment produced about 25.7% of Nash Finch's overall sales in fiscal 2007.
