Two Big Food Distributors to Merge
OKLAHOMA CITY (AP) _ Two big rival food distributors have agreed to merge in a $1 billion deal that will create the nation’s leading supplier to grocery stores and supermarkets.
The announcement Wednesday that Fleming Companies Inc., was buying crosstown competitor Scrivner Inc. marks the latest combination in a business that has been consolidating for some time.
″This is the type of opportunity that comes up in this business every 10 or 20 years - where the size, location and price were exactly right,″ said Robert E. Stauth, Fleming’s chairman and chief executive.
Under the terms of the deal, Fleming will purchase Scrivner’s stock for $1.085 billion in cash and keep the Fleming name.
If approved, the merger would generate combined sales revenue of about $19 billion, making Fleming the nation’s largest food distributor. SuperValu Inc. of Eden Prairie, Minn., is presently No. 1, with revenues of just under $16 billion in 1993.
Stauth, speaking in a telephone news conference, said it was premature to say how the acquisition would affect the number of employees.
″There’s no way to know,″ he said. ″We will be in no big hurry to make changes there (at Scrivner).″
Fleming has 31 distribution plants nationwide and Scrivner has 21. After the merger there will be 44, Stauth said, adding that the eight to be eliminated will not necessarily all be Scrivner-owned properties.
Stauth said Scrivner officials approached Fleming two months ago to say the company was going to be sold.
″This is about as friendly as it gets,″ Stauth said when asked if it could be considered a hostile takeover.
Although the concentration of distributor strength into fewer hands raises possible antitrust concerns, industry analysts said the trend could ultimately lower costs to consumers as distributors cut their own duplicative operations.
″It is still an extremely competitive industry,″ said Brooks G. O’Neil, who follows the consumer food business for Piper Jaffray, a Minneapolis investment firm.
As the strongest contenders get bigger and lower their own expenses, he said, ″you have the potential to have cost savings for consumers as well.″
Marty McDevitt, an analyst with the Milwaukee investment firm Cleary Gull, said rumors had been circulating for weeks in trade circles that Fleming and Scrivner were in negotiations.
″This just continues a trend that’s been in place for some period of time in what’s left of this industry,″ McDevitt said.
The proposal is the second major deal in the industry in the past two years. In October 1992, SuperValu acquired Wetterau Incorporated of St. Louis for $1.1 billion.
Fleming said it will serve more than 5,800 independent and chain supermarkets and more than 2,800 convenience stores. Fleming also will have 315 corporate retail stores, representing 15 percent of its volume. The company now has six.
The acquisition is subject to approval by regulators and the boards of both companies. Fleming, which plans to finance the deal through bank loans, predicts it will be completed by midsummer.
Stauth said the move would strengthen Fleming’s customer base throughout the Midwest and East, and will put it in seven new markets: Iowa, the Carolinas, Western Pennsylvania, New York, Illinois and Minnesota.
″That will increase our sales volume and should allow us to reduce distribution and marketing expenses proportionately,″ Stauth said.
Scrivner chairman and chief executive Jerry Metcalf said Scrivner and Fleming have similar corporate cultures.
″When all the details are worked out, the combination of companies will have a dynamic impact on our industry,″ he said.
In mid-December, Fleming announced it was reviewing its operations and considering selling or consolidating some units because of anticipated lower- than-expected earnings in the fourth quarter of 1993.
In January, Fleming said it planned to close its five regional staff offices and cut employment by at least 2,000 as it worked to improve performance.
Scrivner is owned by Franz Haniel & Cie GmbH, a privately held German company.