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Bi-Lo to Acquire Winn-Dixie

MAULDIN, S.C. -- In a deal valued at $560 million, 207-unit Bi-Lo LLC, based here, will acquire Jacksonville, Fla.-based Winn-Dixie, which operates 480 supermarkets throughout Florida, Alabama, Louisiana, Georgia and Mississippi. The $9.50 per-share cash offer is roughly 75 percent higher than Winn-Dixie's closing price on Dec. 16.

Pegged as the fourth-largest U.S. retail food acquisition in the past five years, the deal was unanimously approved by Winn-Dixie's board and is expected to close in the next 60 to 120 days, creating the ninth-largest supermarket chain in the country.

Once approved, the combined Southeast regional supermarket organization will operate 690 grocery stores and have 63,000 employees in eight states throughout the southeastern United States, which will enable it to boost sales, reduce costs, enhance efficiencies and expand into new states while positioning both banners to better compete against large national retailers and fast-growth regional competitors alike.

"Scale is important," Bi-Lo Chairman Randall Onstead told Progressive Grocer in an exclusive interview. "It provides stronger negotiating power with vendors, makes us more efficient and drives costs down to deliver more value to the shopper."

The size of the combined retail organization will also translate into cost savings and related benefits for Southeast U.S. grocery shoppers, Onstead told PG, as a result of helping the banners better "leverage a positive impact for our customers," with a stronger platform to offer exceptional service.

Onstead said the deal was a logical move for the chains "from a footprint perspective," since the companies' respective store bases are contiguous, but not overlapping. "We have a desire to grow our business, and we look for opportunities to do that," he added.

No store closings are expected for either Bi-Lo or Winn-Dixie, whose combined management structure and headquarters locations have yet to be determined.

Winn-Dixie emerged from Chapter 11 bankruptcy protection in 2006. In its most recent quarter, the Jacksonville, Fla.-based grocer's revenues rose 3 percent, yet the company posted a loss of about $24 million.

A special committee of the Winn-Dixie board of directors, consisting of eight independent directors and advised by independent financial and legal advisors, negotiated the transaction and recommended it to the full board, which then unanimously approved the agreement and recommended Winn-Dixie shareholders vote in favor of the deal.

Peter Lynch, Winn-Dixie's chairman, CEO and president, said that the combined company would be "stronger than our individual businesses and create opportunities for continued advancement through the cross-pollination of our people and the sharing of ideas across our organizations, all to the benefit of our guests, suppliers, team members and the neighborhoods that Winn-Dixie serves."

Once the deal is complete, Winn-Dixie will become a privately held, wholly owned subsidiary of Bi-Lo and will cease trading on the NASDAQ. In the interim, the chains will continue to operate as separate companies, and it's expected they will continue to operate under their respective banners.

Meanwhile, the deal has sparked potential claims investigations by at least three law firms to determine whether Winn-Dixie's board potentially breached its fiduciary duties to stockholders by failing to adequately shop the company before agreeing to enter into the proposed transaction, and whether the company has disclosed all material information to shareholders about the transaction.

Harwood Feffer LLP, Glancy Binkow & Goldberg LLP, and Levi & Korsinsky are among the legal firms calling for the investigation, one of which also alleges that Bi-Lo "is underpaying for Winn-Dixie shares, thus unlawfully harming Winn-Dixie stockholders. In particular, at least one analyst has set a price target for Winn-Dixie stock at $11 per share, Winn-Dixie shares have traded as high as $10.08 as recently as July 21, 2011, and the company has reported a book value of $14.98 per share, for the most recent quarter."


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