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Grocery chain expands
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November 7, 1997: 7:10 a.m. ET
Meyer to acquire Quality Food, Ralphs Grocery for $4.8 billion
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NEW YORK (CNNfn) - Grocery chain Fred Meyer Inc. has reportedly reached agreements to purchase Quality Food Centers Inc. and privately-held Ralphs Grocery Co. for about $2 billion in stock and the assumption of $2.8 billion in debt.
The deals will make Fred Meyer the nation's No. 4 grocery store chain with an estimated $15 billion in annual sales and more than 800 stores in 14 states.
Fred Meyer will issue about 22.5 million shares to acquire Compton, Calif.-based Ralphs for $700 million in stock and the assumption of $2.4 billion in debt. If Fred Meyer's shares fall below $26.70 a share, the number of shares to be issued will be raised to a maximum of 24 million shares.
Meyer will issue about 42 million shares to buy Bellevue, Wash.-based Quality Food for $1.3 billion in stock and the assumption of $400 million in debt. Shareholders will receive 1.9 shares of Meyer common stock, or $55 in value, whichever is greater. The deal is subject to a maximum exchange ratio of 2.3 shares for each QFC share.
Fred Meyer currently has 265 stores, mostly in the Pacific Northwest, with 50,000 employees and assets of $1.74 billion. Ralphs has 27,000 employees and 406 stores and Quality Food Centers 11,000 employees and 147 stores.
Meyer's purchase of the two chains would give it dominance in the western U.S. as Quality has a large presence in the Seattle area. Quality Foods just recently purchased Hughes Family Markets and its 57 stores in Southern California, which analysts say will fit well with Ralphs No. 1 market share in California.
Fred Meyer estimates its 1997 sales will come in at $7.3 billion, Ralphs will have an estimated $5.56 billion in sales and Quality Foods more than $2 billion in revenue. If the deal goes through, food sales will account for 88 percent of Meyer's total sales compared to 75 percent currently.
Also, if the deal goes through, the combined company will be the dominant player in Los Angeles, Seattle, Las Vegas, Albuquerque, N.M. and Salt Lake City. It will be No. 2 in Phoenix and Portland.
Six months ago, Meyer announced it was buying Smith's Food and Drug Centers Inc. for $720 million and the assumption of $1.3 billion in debt. That deal added 152 stores throughout the Mountain and Southwestern regions.
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