D’Agostino: Kings’ Sized Opportunity or Mistake?

Sep 30, 2002

Agostino Supermarkets is expected to complete its $160 million deal to acquire Kings Supermarkets this week. Many, if not most, food industry experts see the merging of D’Agostino’s and Kings as a positive step noting the chains’ respective histories of catering to affluent consumers in the metropolitan New York area.

The purchase of Kings does not come without risk, however. In making the deal, D’Agostino is buying a chain with more stores (28 vs. 23) and more than twice its earnings. To make the deal, D’Agostino has had to take on a heavy debt burden.

To concerns expressed over the deal’s financing, Nicholas D’Agostino Jr., the company chairman, told the New York Times, “If the banks are willing to lend us money, they’re not lending it to see us go into bankruptcy.”

Moderator’s Comment: Will D’Agostino and Kings be successful?

We’ve been saying that we liked this deal from when we
first heard that it might happen. We’re not about to change our opinion at this

We can’t claim to know Nick D’Agostino well, having spoken
with him only a few times over the years. His (and his family-owned company’s)
reputation with suppliers and competitors is top notch.

That’s why we were perplexed about something we read in
the NY Times article. Mr. D’Agostino, responding to a question
about the risks of the deal and rumored disagreements between family members
about it, said, “I have the most to lose. I’m 63. I have a house in South Carolina
and a house on Long Island and I belong to three country clubs. I’m going to
have to work harder than I ever have.”

We doubt that Mr. D’Agostino’s risk will be of much consolation
to those who lose jobs because of redundancies (estimates range between 75 and
200 positions will be affected). With 51 stores, Mr. D’Agostino has more people
to lead. The growing chorus he will hear of “Hey, Mr. D’Agostino. Move Closer
to Me.” will be coming from within his own ranks. He would do well to listen.
Anderson – Moderator

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