C&S Wholesale Grocers has struck a $1.77 billion deal to acquire SpartanNash, with the merger creating a company encompassing 60 distribution centers and more than 200 stores, in a reflection of the nation's food industry consolidation.
Keene, New Hampshire-based C&S and SpartanNash, headquartered in Byron Center, Michigan, on Monday said they had entered into a definitive merger agreement, binding the two food wholesalers and supermarket operators. Under terms of the deal, C&S will pay $26.90 per share for SpartanNash, a 53% premium over the company's closing price on Friday.
Wells Fargo has provided a debt-financing commitment for the transaction, which is expected to close late this year.
The deal exemplifies some of the consolidation that the food and grocery industry has seen in the past few years, with companies bulking up to compete against rivals such as Walmart, Amazon and foreign discounters like Aldi and Lidl. Both C&S and SpartanNash have recently made other acquisitions.
C&S was involved in the derailed merger of Kroger and Albertsons Cos., slated to buy hundreds of their grocery stores in an effort by the two supermarket giants to appease the Federal Trade Commission. But a judge blocked that $24.6 billion deal in December over antitrust concerns.
Asked about their deal coming under federal scrutiny, SpartanNash said it's ready to "work through the necessary shareholder and regulatory approvals." C&S declined to comment.
"The stability of the combined organization will allow the combined company and its customers to better compete against various extremely large global grocers in the U.S. food-at-home space, a more than $1 trillion annual industry," the companies said in a statement.
Better network, more stores
C&S is a national wholesale grocery supplier serving more than 7,500 independent supermarkets, chain stores, military bases and institutions. It also operates grocery stores throughout the Midwest, South and Northeast.
SpartanNash is a global wholesale food distributor to independent and chain grocers, national retail brands, e-commerce platforms, and U.S. military commissaries and exchanges. On the retail side, it operates nearly 200 grocery stores primarily under the banners of Family Fare, Martin's Super Markets and D&W Fresh Market, in addition to dozens of pharmacies and gas stations with convenience stores.
The companies said they will have complementary food distribution networks to better support independent retailers. Furthermore, operating at a larger scale will enable the merger company to secure the "best possible delivered cost of goods and promotional discounts, which are expected to translate to better pricing for community retailers and at the shelf for consumers," according to C&S and SpartanNash.
"Profit margins in the grocery industry are very low — averaging only 1.6% — and customers and consumers deserve the best value for food and household goods," the two companies said.
Addressing food deserts
The merger will also help preserve "accessible, affordable nutrition and pharmacy services in local communities," according to C&S and SpartanNash.
As part of the scrapped Kroger-Albertsons' merger, C&S had been slated to buy 579 of their grocery stores for $2.9 billion. Then in February, C&S was part of a group, including Southeastern Grocers senior leadership and private investors, that acquired roughly 170 Winn-Dixie and Harveys stores from Aldi.
SpartanNash made two acquisitions last year to expand its portfolio. In early October, it purchased Fresh Encounter, a 49-store supermarket chain serving Ohio, Indiana and Kentucky. At the end of that October, SpartanNash struck a deal to acquire Markham Enterprises, Markham Oil and its affiliates, a three-store chain of convenience stores and a fuel distributor in central Michigan.
For the record
Solomon Partners is serving as the exclusive financial adviser and Gibson, Dunn & Crutcher is serving as legal adviser to C&S. Sullivan & Cromwell is serving as legal adviser to C&S in connection with its debt financing. BofA Securities is serving as exclusive financial adviser and Cleary Gottlieb Steen & Hamilton is serving as legal adviser to SpartanNash.