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Spartan Stores, Nash Finch To Combine For Significant Scale And Reach

Spartan Stores, Nash Finch
Spartan Stores, Nash Finch

Nash Finch will be wholly owned subsidiary of Spartan Stores

Eidson will be president and CEO, Covington to be in advisory role

Sturken: Military business an important part of transaction

Regional grocery distribution and retail company Spartan Stores and distributor Nash Finch Co. have entered into a definitive merger agreement under which the two companies will combine in an all-stock merger valued at approximately $1.3 billion, including existing net debt at each company. Nash Finch will become a wholly owned subsidiary of Spartan Stores. Nash Finch’s military division will remain intact.

The combination creates a company with pro forma annual sales of approximately $7.5 billion. Together, Spartan Stores and Nash Finch will have 22 distribution centers covering 37 states, 177 retail stores and will be the leading distributor to military commissaries and exchanges in the U.S.

Dennis Eidson, president and CEO of Grand Rapids, Mich.-based Spartan Stores, will serve as president and CEO of the combined company.

“This transformational transaction provides a unique opportunity to bring together Spartan Stores’ grocery distribution and retail operations in Michigan, Indiana and Ohio with Nash Finch’s leading position in grocery distribution to military commissaries and exchanges and its complementary wholesale grocery network throughout the U.S.,” Eidson said in a news release. “Together, we will create one of the premier grocery wholesaler and retail operators, with a comprehensive portfolio of high quality private brands, nationwide distribution services and a strong platform for future growth. By combining our resources, expertise and talent we will become a stronger and more efficient organization with an enhanced ability to leverage our size, geographic reach and hybrid business model to better compete in the evolving grocery industry.”

Alec Covington, president and CEO of Minneapolis, Minn.-based Nash Finch, will remain with the combined company in an advisory role.

“This transaction is consistent with our vision to become the largest and most admired food distributor in the U.S.,” Covington said. “The complementary operations and outstanding strategic fit of these two companies create significant value for both companies’ shareholders … Spartan Stores and Nash Finch share a common culture and passion for integrity, teamwork, innovation and dedication to the customers we serve.”

The combined company will retain a presence in Minneapolis and Grand Rapids. Nash Finch’s military business will continue to conduct its operations as it has in the past and will remain based in Norfolk, Va. Edward Brunot, currently president of Nash Finch’s military business, will continue to lead that business in the combined organization.

Craig Sturken, chairman of Spartan Stores’ board of directors, will serve as chairman of the board of directors of the combined company, which will be comprised of 12 members, with seven being designated by Spartan Stores and five being designated by Nash Finch.

Sturken told The Shelby Report that the merger will result in a more balanced company, “because it now puts Spartan into the military side, which is a very important part of this transaction.”

Sturken has been with Spartan Stores since 2003, when he was called out of retirement to lead the company that at the time was reporting declining sales and stock prices. Under his leadership, the company experienced a substantial turnaround, and it was Sturken who brought Eidson on board.

“It wasn’t a good situation for the organization, the shareholders or the employees,” Sturken said. “We’ve been able to change things, and we’ve been wanting to grow our footprint.”

Sturken said the merger is a “great marriage of two hybrid food distribution companies in the Midwest.

“We are delighted to do this. It’s a great way of growing our company. The synergies are excellent and the future prospects are great,” Sturken said.

The combined company also will have a comprehensive portfolio of private brands, including Spartan Stores’ Spartan brand and Nash Finch’s Our Family and Nash Brothers Trading Co. brands.

Under the terms of the transaction, which has been unanimously approved by the boards of directors of both companies, Nash Finch shareholders will receive a fixed ratio of 1.20 shares of Spartan Stores common stock for each share of Nash Finch common stock they own. Upon closing, which is expected by the end of calendar year 2013, Spartan Stores shareholders will own approximately 57.7 percent of the equity of the combined company and Nash Finch shareholders will own approximately 42.3 percent.

The combined company is expected to achieve approximately $50 million in annual cost synergies by the third full fiscal year of operations, primarily derived from the consolidation of corporate functions, procurement and other operating efficiencies.

The transaction is expected to be accretive to earnings per share, excluding one-time costs, within the first full fiscal year of operations. The combined company also expects to consistently continue to return value to shareholders through a dividend that will initially be set at $0.48 per share on an annualized basis.

The transaction is subject to customary regulatory approvals and closing conditions, including the approval of Spartan Stores and Nash Finch shareholders.

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