www.dadeinfo.com

By WRCB Staff
CHATTANOOGA (WRCB) -- Bi-lo Grocery stores could, once again, be for sale.
The chain just emerged from Chapter 11 bankruptcy protection in May.
Lone Star bought the stores in 2005 and tried to sale the chain before the bankruptcy filing, but was unable to find a buyer.
A source says Kroger and Publix have shown interest in purchasing the chain, officials for both companies will not comment.

(UPDATED COVERAGE, Aug. 12) Kroger Co. and Publix Super Markets are among potential bidders for Bi-Lo LLC, a U.S. grocery chain that emerged from bankruptcy in May, Reuters reported.

Bi-Lo, which has more than 207 stores in four Southeastern states, is for sale and has drawn interest from “strategic” and private equity buyers, Reuters reported, citing a source familiar with the matter that the news organization didn’t identify.

Cincinnati-based Kroger, the largest U.S. supermarket chain, and Publix, based in Lakeland, Fla., are among potential bidders and are considering buying “at least a significant number” of Bi-Lo stores, according to Reuters.

Publix spokeswoman Maria Brous denied the report, which she deemed a “rumor.” Publix operates 1,020 stores in the Southeast, mostly in Florida and Georgia.

“We have not to my knowledge put a bid in for any Bi-Lo locations or expressed any interest in any of their locations,” Brous said Aug. 10.

Kroger spokeswoman Meghan Glynn said the company does not comment on rumors and speculation.

A spokesman for Lone Star Funds, a Dallas-based private equity firm that bought Bi-Lo from Dutch supermarket group Royal Ahold for $660 million in 2005, also didn’t respond to messages.

Bi-Lo may be an appealing acquisition for a larger grocery company seeking to build a “value” channel that targets lower-income consumers in a weak economy, industry analyst Phil Lempert said.
Some traditional U.S. supermarket chains have already announced plans to expand their discount operations. For example, Supervalu Inc. in 2009 said it will double the number of stores in its Save-A-Lot discount unit over the next five years. Eden Prairie, Minn.-based Supervalu currently runs about 1,180 Save-A-Lot stores.

“Bi Lo, with the proper support and leadership, could be a huge opportunity for a larger chain to have impact and build relationship with a lower-income customer base,” Lempert said in an e-mail. “The key to success will be understanding what this customer is looking for and giving it to them in an environment that celebrates food, versus just piling high and selling cheap.”

The recession and food deflation hurt many supermarkets in recent years. In March 2009, Greenville, S.C.-based Bi-Lo filed for Chapter 11 bankruptcy, shortly before payments on some debt were due.


Under the bankruptcy agreement, Bi-Lo will receive a $200 million loan from Credit Suisse Group and $150 million in new equity investment from Lone Star Funds.

The Bi-Lo supermarket chain, which recently emerged from bankruptcy protection, could be for sale again, posing a new wrin¬kle of uncertainty for the com¬pany's 15,000 employees and shoppers in four Southeastern states.

Reuters, the international wire service, and Supermarket News, a trade publication, reported the Mauldin-based food retailer has drawn interest from competitors Kroger and Publix as well as other strategic and private equity concerns.

Bi-Lo officials, including Michael Byars, the company's presi¬dent and chief executive officer, couldn't be reached for comment by The Greenville News.

Josiah M. Daniel III, an attor¬ney for Bi-Lo, told The News on Tuesday that a bankruptcy court still has jurisdiction over the com¬pany for limited purposes, includ¬ing administrative claims still to be paid and disputed claims that are pending.

Court hearings will be held over the next several months to resolve those issues, Daniel said. He said he anticipates applying for a final court decree in about six months.

Hedeclined comment onapos¬sible sale of Bi-Lo. The company has more than 200 stores and is owned by Lone Star Funds, aDal¬las- based private equity firm.

A spokesman for Lone Star de¬clinedcommenton the possibility of a sale. Company officials with Kroger and Publix couldn't be reached.

Aspokeswoman for Food Lion, whose Belgian parent last year agreed to buy a majority of Bi-Lo's assets before the deal fell through, said Tuesday the com¬pany wouldn't comment "on mar¬ket rumors or merger specula¬tion."

Reuters, citing a source famil¬iar with the matter, said Bi-Lo is up for sale and has drawn interest from strategic and private equity buyers. Supermarket chains Kroger and Publix are among po¬tential bidders and are consider¬ing buying at least a significant number of Bi-Lo stores, Reuters reported.

Supermarket News, cit¬ing a source with knowl¬edge of the situation, re¬ported Bi-Lo has drawn in¬terest from Kroger and Pu¬blix. The publication, however, reported that a Publix spokeswoman said the company wasn't active¬ly engaged in the purchase of Bi-Lo.

Officials of Bi-Lo and the Delhaize Group of Brus¬sels said last October they had signed a non-binding letter of intent for the Bel¬gian company to purchase "a substantial majority" of Bi-Lo's assets for $425 mil¬lion.

Delhaize said it would integrate Bi-Lo's assets in¬to its wholly owned Food Lion subsidiary.

However, Byars said at the time "all options for Bi-Lo remain under consider¬ation" as the company re¬structured in bankruptcy court, and Bi-Lo's creditors put forward alternative proposals.

FoodLion, based in Salis¬bury, N.C., later acknowl¬edged it wasn't part of com¬peting reorganization plans filed in court by Bi-Lo and a committee of Bi-Lo's unsecured creditors.

Bi-Lo, straining under its debt and intense competi¬tion within the grocery in¬dustry, in March 2009 filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company in May emerged from bankruptcy protection with funding for new loans and still owned by Lone Star.

Bi-Lo said in court filings that from the outset, its ob¬jective for reorganization was twofold: to maximize distributions to its credi¬tors and to create "the most viable and stable post¬emergence company as possible."

According to the filings, Bi-Lo considered a number of different plan structures, including the sale of some or all of the company's as¬sets and operations, an eq¬uity investment by one or more third parties unrelat¬ed to Bi-Lo, and an equity investment by Lone Star.

"After significant analy¬sis and consideration, the debtors have opted to file a plan sponsored by Lone Star because the debtors believe that plan best satis¬fies the debtors' twin objec¬tives," the company said.

Lone Star, according to court records, in Decem¬ber 2004 acquired all of the interests of Bi-Lo Holding from Ahold, the Dutch re¬tailer, for $567.3 million.

At the time, Bi-Lo owned Bruno's Supermarkets Inc., subsequently known as Bruno's Supermarkets LLC.

Bi-Lo and Bruno's served different regions, demographics and custom¬er bases, with Bi-Lo operat¬ing in South Carolina, North Carolina, Georgia and Tennessee, and Bru¬no's in Alabama, Missis¬sippi, Georgia and Florida.