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Food Lion buys Hannaford
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August 18, 1999: 1:52 p.m. ET
Supermarket chain to pay $3.6B for rival, form 6th-largest U.S. grocer
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NEW YORK (CNNfn) - Food Lion Inc. agreed Wednesday to buy supermarket rival Hannaford Brothers for about $3.6 billion in cash, stock and debt, creating a grocery powerhouse with operations from Maine to Florida.
North Carolina-based Food Lion, which is 53 percent owned by Belgium's Delhaize, said the purchase will create the 6th-largest U.S. grocery chain, with 1,400 stores throughout the East Coast and annual revenue of $13.5 billion. The new company will be known as Delhaize America Inc.
The deal reflects the rapid consolidation under way in the supermarket industry. When press reports about a deal involving Maine-based Hannaford surfaced Tuesday, numerous potential suitors were mentioned, including Albertson's (ABS), Safeway (SWY), Kroger (KR) and Netherlands-based Ahold, which has become one of the top supermarket operators in the United States through acquisitions of chains including Pathmark and Giant.
The deal "is a strategic acquisition that will help fuel our future growth," and "build shareholder value," Food Lion CEO Bill McCanless said.
Under the deal, Food Lion will pay $79 in cash and stock for each outstanding share of Hannaford, a 24 percent premium over the price of Hannaford (HRD) shares when the stock was suspended Tuesday amid rumors of a deal.
Hannaford stock added 8-1/4 to 71-15/16 Wednesday after trading resumed.
But Food Lion (FDLNA) stockholders weren't as excited about the deal. Shares in the company dropped 2-3/8 to 8-5/8 Wednesday afternoon.
In Brussels, Delhaize shares lost 1.7 percent to 78.70 euros Wednesday, after initially rising about 3 percent after the deal was announced.
Food Lion will pay $2.7 billion in cash and $650 million in stock for all outstanding shares of Hannaford. Food Lion also will assume about $300 million of Hannaford debt.
The new holding company, Delhaize America Inc., will become the umbrella for both Food Lion and Hannaford. It will be listed on the New York Stock Exchange beginning Sept. 9, replacing the current Food Lion shares traded on the Nasdaq market.
Shares of Hannaford over the past year.
Hannaford operates more than 150 Hannaford and Shop 'n Save stores -- most of them in New England and the Mid-Atlantic states -- and had annual revenue in 1998 of $3.3 billion.
Hannaford became a hot property when major shareholder Empire Co., which owns a 26 percent stake, said earlier this year it would end the standstill agreement preventing it from adding to or disposing of its holding. Hannaford stock has risen by more than a third in recent months in anticipation of a deal.
Food Lion Inc. runs supermarkets in 11 Southeastern states under the names Food Lion, Kash n' Karry and Save 'n Pack. Sales totaled $10.2 billion in 1998.
The companies said the deal will cut into per-share earnings for the new company in 2000, but will add to earnings "from 2000 on."
The buyout has been approved by the boards of both companies. Hannaford shareholders and regulators also must approve.
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