BI-LO to Acquire Winn-Dixie

Discussion
Dec 20, 2011
Tom Ryan

BI-LO on Monday said it agreed to acquire Winn-Dixie Stores in a deal valued at $560 million, establishing the ninth largest U.S. supermarket. The combined company will have about 690 stores and 63,000 workers in eight states in the southern U.S. Winn-Dixie will become a privately-held subsidiary of BI-LO.

BI-LO, based in Greenville, SC, agreed to pay $9.50 per share in cash, a 75 percent premium to Winn-Dixie’s Friday closing stock price.

In an interview with Bloomberg News, BI-LO Chairman Randall Onstead said his company approached Winn-Dixie earlier this year, seeking to boost sales and better compete with larger rivals such as Wal-Mart and Delhaize Group’s Food Lion. Winn-Dixie, based in Jacksonville, FL, provided “absolutely the best geographic fit for us,” Mr. Onstead said. “There will be real dollar savings as we look for efficiencies in putting these companies together.”

The deal extends BI-LO’s reach to five additional states: Florida, Alabama, Louisiana, Georgia and Mississippi. BI-LO’s 207 supermarkets are in North Carolina, South Carolina, Georgia and Tennessee. BI-LO plans to incorporate Winn-Dixie’s efforts to stock its supermarkets with a variety of ethnic and local foods for its base of diverse customers, Mr. Onstead told Bloomberg.

Following completion of the merger, the BI-LO and Winn-Dixie banners are expected to remain. No closures are expected since the stores have no overlap. The new management team will be decided once the deal is closer to being finalized. The transaction is expected to close within the next 60 to 120 days, pending shareholder and antitrust approval.

Both grocers filed for bankruptcy protection in recent years. BI-LO filed in March 2009 and emerged in May 2010. Winn-Dixie filed for bankruptcy protection in 2005 and came out in 2006.

Mr. Onstead declined to comment to Reuters on rumors that Bi-Lo had put itself up for sale before seeking to buy Winn-Dixie.

“We are focused on the combination with Winn-Dixie. Both companies have faced headwinds in their past but both are now doing much better and are strong regional brands,” Mr. Onstead told Reuters.

Discussion questions: What do you think of a BI-LO/Winn-Dixie merger? In what ways may it help each banner’s competitive position? What lessons can be learned from past regional grocer combinations?

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26 Comments on "BI-LO to Acquire Winn-Dixie"


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David Livingston
Guest
9 years 4 months ago

First neither BI-LO or Winn-Dixie really have any future in grocery retailing. Both are extremely low volume/low sales per square foot retailers that are no match for Publix and Walmart. So I don’t expect any kind of consumer level improvements.

Financially this is a sweet deal for private equity. First raid Winn-Dixie’s cash. Then sell the distribution centers to C&S. Then sell everything west of Panama City to C&S retailers, such as Rouses. They have many opportunities to add or consolidate stores. I think the private equity group will come out ahead after taking the cash and selling assets. Too bad Winn-Dixie could not have done this for their shareholders so they could reap those rewards. Look for shareholder lawsuits to follow. Especially if management gets golden parachutes as a reward for keeping the stock price low.

Dr. Stephen Needel
Guest
9 years 4 months ago

Any new management for Winn-Dixie has to help that chain.

Adrian Weidmann
Guest
9 years 4 months ago

This was a great acquisition for BI-LO. There is no geographic overlap and it allows BI-LO to open up new markets. The challenge with all acquisitions and particularly this one will be the merging of the midwestern and southern cultures into a single ‘local’ brand identity.

Dave Wendland
Guest
9 years 4 months ago

BI-LO has done a tremendous job overcoming adversity and re-positioning itself as a preferred shopper destination within its markets. This same energy (and key learnings) may help shore up Winn-Dixie in its markets which have faced stiff competition in recent years. Furthermore, the combined purchasing power and strength should bode well for the combined entity. I look forward to watching these two banners succeed.

Roger Saunders
Guest
9 years 4 months ago

The path to success here has to be in “execution.” That will take an enormous amount of focus and cooperation on the merchandising, allocation/distribution, marketing, and store ops side.

Debt should be under control. Associates need to be assured there is a future. Buying power is strengthen a bit. Focus the organization on quality points.

The private equity lads are going to have to get out of the way, and let the right professionals drive the business. If this group doesn’t get greedy, and holds their “fire” for 5 or 6 years, the banners can hold their own in select markets, and position the combined firm to move ahead. This is the wild card, and the hiccup that will make success a challenge.

Anne Howe
Guest
9 years 4 months ago

I’m surprised BI-LO paid such a big premium for Winn-Dixie. Does this mean they have no cash to invest in the stores themselves? Because in my experience, neither of them are preferred destinations in their markets, especially versus Publix, Harris Teeter and The Fresh Market stores in the grocery channel.

Ben Ball
Guest
9 years 4 months ago

You have to build something worthwhile to have something worthwhile to sell. Squeezing a middle-market competitive chain into the Southeast between Publix and Food Lion will be a challenge. But BI-LO has done a credible job in the Carolinas squeezing between Harris Teeter and Food Lion. If they pull this off, they will have something to sell.

Ed Rosenbaum
Guest
9 years 4 months ago

This can be a good merger for both grocers. First, Winn-Dixie is going nowhere fast. Second, the Winn-Dixie locations are in markets where BI-LO has no presence.

I am always amazed when we are told there is no overlap so there will be no store closings. In this case, it might be as they say. However, you can count on many people being out of work because of the geographic proximity and job function overlap.

W. Frank Dell II
Guest
9 years 4 months ago

Both brands are weak as evidenced by their recent bankruptcy and I have yet to see two weak companies making one strong company. Publix runs a great operation with a true consumer focus. Walmart has taken away the larger markets leaving only smaller towns and this is Food Lion territory. Like A&P and Pathmark, what this merger does is lower overhead costs, but there is real need for a merchant.

Ben Sprecher
Guest
Ben Sprecher
9 years 4 months ago

Both BI-LO and Winn-Dixie are operating in depressed economic areas against brutal price competition from Walmart and dollar stores. At the same time, the two chains’ market position is hemmed in at the high end by Publix and Harris Teeter.

For Winn-LO (BI-Dixie?) to succeed, they will need to stay aggressive on price while leveraging the key advantage they have over their bottom-end competitors — their loyalty programs. To put it bluntly, both retailers need to reward and retain their best shoppers, with the support and funding of their brand partners, or else they will be squeezed to death by the competition.

Gene Hoffman
Guest
Gene Hoffman
9 years 4 months ago

Will the BI-LO/Winn-Dixie merger make the resulting entity more competitive? — THAT IS THE QUESTION! (My apologies to ol’ Willie Shakespeare for using his famous puzzlement line.)

David Livingston makes some cogent points above about this matter … and questions remain about the “whys” for this marriage of these formerly bankrupt chains.

Re: lessons learned, when a fair-to-middling company (BI-LO) offers a 75% premium to acquire a similar company (Winn-Dixie) one wonders if this is good regional fit, a financial hit, or a just a misfit. It conjures up a promising mystical vision of a declining Albertsons being gobbled up several years ago to create a Supervalue, a delusion now seemingly mired in quicksand.

One might assume that the BI-LO deal makers in this affair believe nothing is worth doing unless the consequences may be serious.

Kai Clarke
Guest
9 years 4 months ago

This is a merger designed to enhance shareholder appeal. Both of these chains are barely surviving and together, it will be their combined weaknesses which hurts them more than their combined strengths.

Bill Hanifin
Guest
9 years 4 months ago

Florida itself might be reason enough for BI-LO to acquire WD.

It was not long ago that grocery was dominated by “big 3” Publix, WD, and Albertsons. Now, despite big numbers from Walmart, grocery in Florida is synonymous with Publix.

Competition is healthy for any market and an infusion of capital and marketing savvy into WD might help it reclaim just a bit of its former glory as well as attention from consumers.

Roy White
Guest
Roy White
9 years 4 months ago

Scale is vitally important in supermarket retailing, and this merger appears to be providing that scale with a good geographic fit and a minimum of bloodletting. At the outset, the prognostications look very good, and both chains have been working exceptionally hard over the past several years to get themselves out of the depressed condition they both were in at the beginning of the last decade.

Winston Weber
Guest
9 years 4 months ago

Those who question the BI-LO acquisition of Winn-Dixie should see BI-LO’s newer stores first hand, which I have done. They represent an excellent shopping experience and compete on equal footing with Harris Teeter. They also have an excellent management team. I believe they have the financial wherewithal to produce the desired results for both banners.

Bill Emerson
Guest
Bill Emerson
9 years 4 months ago

Grocery is, like most 4-wall operations, undergoing a shakeout as Walmart and specialty operations like Whole Foods have eaten up the available market share. This leaves room for one dominant grocer, WMT, and WF, period. There is no future for second-tier players.

David is right, this is great for the private equity guys as they raid the cash and sell off the assets.

Carol Spieckerman
Guest
9 years 4 months ago

On the positive side, keeping the brands discrete was a smart move. This will allow BI-LO and Winn-Dixie to make the most of the upgrades and refinements they have made to their store environments and private label portfolios. Maintaining separation will also allow the combined company to tap into any localized loyalty that the brands enjoy in their markets. I’m watching to see if Winn-Dixie’s high-end transformational store concept moves the needle upward. If so, that could create some interesting idea-sharing opportunities.

Jean Forney
Guest
9 years 4 months ago
Those of you who feel that BI-LO has a weak brand and has not done a good job repositioning itself, you probably need to get your facts straight. The comp sales and EBITA performance are what have encouraged and allowed Lone Star to make this acquisition. The management team post chapter 11 has done an amazing job at not only holding their own, but also winning against Walmart, Food Lion and the other price impact players. If you have access to investigate this, you should so you can get your facts straight. Do I agree WD’s strategy of “out Publixing” Publix and charging higher prices is about the most ridiculous thing I’ve heard? Yes! And how very Albertsons of them…declining customer base = raising prices does not work…as we’ve seen time and again. That having been said, while there is certainly a lot yet to be seen, if the management team currently at BI-LO is driving the strategy, I believe there is a better shot at turning WD around than not. Do I agree the… Read more »
David Livingston
Guest
9 years 4 months ago
I work for a lot of BI-LO and Winn-Dixie competitors. They could not be happier. Sure, the new BI-LO and remodeled Winn-Dixie stores look pretty. But they are doing lousy sales volumes. That won’t change. Publix, Walmart Neighborhood Market, and Rouses are all in a sweet spot to pick up new stores or consolidate. This merger has little to do with selling groceries, nothing to do with improving sales, and nothing to do with management execution. This is all about private equity milking assets. Stockholders are going to be furious over Winn-Dixie spending millions to remodel stores and then getting a zero return. Instead the stock price was chopped in half, now its back to where it was before the remodels. Private equity is getting these stores for a little over a million a piece, and remodeled and improved. A real bargain for them and whoever buys them. A raw deal for shareholders who could have reaped the same rewards if Winn-Dixie had liquidated on its own. This is a bankrupt company buying a bankrupt… Read more »
Craig Sundstrom
Guest
9 years 4 months ago

“Both grocers filed for bankruptcy protection in recent years.”

Wasn’t it Tom Petty — appropriately enough, a North Florida native — who recorded “Even the Losers Get Lucky Sometimes”? I wish them well, especially their 63,000 long-suffering employees and their equally suffering customers (however many — or few — there may be).

Anne Bieler
Guest
Anne Bieler
9 years 4 months ago

This is going to be uphill for both banners. BI-LO has done a nice job with their stores, and WD has some good locations, but both are facing fierce, well established competitors who have been staying in the game despite the economy.

Jean Forney
Guest
9 years 4 months ago
David, with all due respect, with regard to BI-LO sales, I don’t call a three year trend of positive comps, market share increases and EBITA increases lousy; not sure who you’re getting your information from, but you have been misinformed. Winn-Dixie’s sales are a matter of public information and there is not a lot of arguing regarding the performance. I don’t think you need to speak to their competitors to learn that the latest strategy is not all they hoped. Lumping them in together is not fair or accurate with regard to overall company performance…and by the way, Lone Star is NOT milking assets at BI-LO. Exactly the opposite; they have put a significant investment into remodels, pricing strategy and brand marketing strategy. Lone Star trusted the management team to spend money wisely, including programs like Price Lock, Fuel Perks!, and Savings Without Sacrifice and the ROI has been tremendous. I have been in the stores, spoken with the employees and witnessed the customer’s response and it’s all very positive and translating successfully to sustainable… Read more »
Matthew Keylock
Guest
Matthew Keylock
9 years 4 months ago

Integration is a tough time with a lot of disruption and uncertainty across the business. Getting through this quickly and smoothly without significant losses in associate and customer engagement will definitely help their chances of success.

David Livingston
Guest
9 years 4 months ago

‘groceryconsult1’ the three year trend at BI-LO in positive comps means nothing. Considering all the money they put in the stores, I don’t think they will ever get back to where they used to be. Even some of the worst chains can get minor insignificant gains during inflationary times. Market share gains? I don’t see that happening with Publix having stronger positive comps and Walmart, while overall store comps are not increasing much, grocery is extremely strong. Really, winning against Walmart? Show me your facts.

I’ll concede to minor comp gains, pretty stores, and upbeat press releases. Heck Winn-Dixie has plenty of that. EBITDA gains are from clever accounting and not from gains in market share. Seems every market study I see in BI-LO areas, they are at the bottom, along with Food Lion when it comes to sales per square foot. Walmart and Publix are far ahead with Harris Teeter in the middle.

Ed Dennis
Guest
Ed Dennis
9 years 4 months ago

Two sick puppies curling up together to die. Neither of these “grocers” have ever made a mark as merchants. Neither have a culture that will support success. When companies get sick the best employees move elsewhere leaving the old and tired and gunslingers to right the ship. The old and tired just get older and the gunslingers just make a lot of noise and accomplish nothing.

Successful retailing is best done by a culture. Neither of these organizations has any direction. Both have jumped from one silver bullet to another for so long that the prospect of thinking beyond the end of the current quarter is so foreign that it is virtually impossible to accomplish. I wish them both luck, but honestly think they are fighting a competitor capable of burying both of them with ease.

Ronnie Perchik
Guest
Ronnie Perchik
9 years 4 months ago

Mergers are an all-too-common happenstance in the world of marketing, and we understand that whether it’s a retailer, a brand, or an agency, these shifts can have both positive and negative effects.

In this case, the merger between BI-LO and Winn-Dixie will definitely increase reach, and open the retailers up to new target markets that, perhaps, they previously didn’t have access to.

There’s of course the obvious negative result, though, of lay-offs and closing down locations. Also, it’s essential in these mergers to ensure that, as, in this instance, the Winn-Dixies turn into BI-LOs, that the previous consumers aren’t surprised or shut out. The transition from brand A to brand B needs to be smooth, in such a way that shoppers aren’t left with a bad taste in their mouths.

The merger was activated, most likely, to benefit both retailers. They just have to ensure that business doesn’t outweigh the customer experience.

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