SEATTLE — Associated Grocers here said last week it expects to decide by midyear whether to sell its wholesale business or continue to operate it as is, John Runyan, president and chief executive officer, told SN.
Making that decision is part of a multipronged strategy the company is pursuing, Runyan said. The first part of that strategy was executed earlier this month when AG reached a preliminary agreement on a sale-leaseback contract for the 55.27-acre property on which its headquarters and distribution center are located.
The agreement, once it's finalized, would allow AG to continue serving its customers from the 1 million-square-foot distribution center on the property, Runyan said.
The next part of the strategy will involve sorting through various offers from prospective buyers for the wholesale business and determining whether AG wants to accept any of them, he indicated. As previously reported, AG has been contacted by several interested parties, which are in the process of conducting due diligence.
Once the decision on whether or not to sell has been made, the company will commit itself to finding a new site for its distribution center — a process it expects to complete by the end of 2007, Runyan said. If the company is sold, it will be up to the new owner to find a new site, he pointed out.
AG reached the sale-leaseback agreement with Sabey Corp. here following a unanimous vote of its directors to accept the offer, pending finalization of contract terms. Although the companies did not disclose the sale price, Runyan said it was “considerably more than $80 million,” which was the cutoff for bids AG considered.
“We were very pleased with the response to our decision to market the property,” he said. “More than 200 companies executed confidentiality agreements with us, and we received 15 firm offers. We rejected all those under $80 million and went through a second round with several companies, then looked at the advantages and disadvantages of each offer before selecting the Sabey offer.”
AG said the warehouse property is one of the largest contiguous commercial land parcels ever made available for sale in the Seattle metropolitan area — a property “that has appreciated in value beyond what makes good business sense for a grocery distribution operation,” Runyan noted.
He also said the buildings on the property, including a grocery and fresh foods warehouse, are more than 54 years old, “and their design and layout is inefficient compared to today's distribution standards.”
AG announced in December it had hired GVA Kidder Matthews, a commercial real estate firm in the Pacific Northwest, to market the property.