Update Spartan Stores Buys DW Food Centers
GRAND RAPIDS — Stores may close. Administrative employees may lose their jobs. Shoppers in East Grand Rapids may finally be able to get their favorite frozen peas without driving across town.
At this point, details are few about Spartan Store Inc.'s purchase of retail competitor D&W Food Centers Inc. At a media briefing Monday morning, leaders of the two companies provided what information they could about the pending transaction.
D&W shoppers may notice one change relatively quickly. Rich Foods products will disappear from the company's 20 West Michigan locations, to be replaced by Spartan private-label products. Of course, some stores may see all products taken off their shelves if Spartan decides to close them.
"As we go through the due diligence process, we will evaluate each location to determine what its future is," said Craig Sturken, president, chairman and CEO of Spartan. Considering the closure of any store would "certainly be part of (Spartan's) due diligence process," he said.
The stores that seemed to pique Sturken's interest most are the stores in Breton Village and Gaslight Village. He admitted that among East Grand Rapids shoppers, D&W has held a "tremendous competitive advantage" over Family Fare. He also expressed the company's eagerness to enter the Kalamazoo and Grand Haven markets, where D&W has established stores.
Spartan does not plan to change the D&W name. In fact, Sturken suggested that D&W may become known as Spartan's upper-tier store, emphasizing the stores' quality and selection of products not found at Spartan's Family Fare stores. That said, the company will begin implementing category management programs in those stores, which will likely result in an overall paring down of the number of products offered.
No real estate is involved in the purchase, as D&W leases its 20 store buildings. Nonetheless, Sturken is eager to consider improvements to those properties. Primarily, that means more Spartan-owned fuel centers.
"On the gas station front, that is an analysis process that we will begin immediately," said Sturken. "This gives us a whole other spectrum of opportunities to achieve greater penetration in the Grand Rapids area with our gasoline business."
Incorporating D&W's 2,200 employees into Spartan's team of 6,500 may mean administrative layoffs. Both Blease and Sturken recognized the potential for job losses.
"Certainly synergies and efficiencies would be part of any transaction like that," said Sturken.
Doug Blease, D&W's president and CEO, said that he had "a real good conversation" with the D&W team, addressing some of the concerns inherent in a corporate takeover. Both CEOs emphasized that personnel decisions will be made once Spartan moves further along in its due diligence.
Sturken added that Spartan has been observing a hiring freeze in the months leading up to the purchase, and that the company plans to interview all of D&W's employees before making any determinations about layoffs.
"I don't think this will be as tragic as one might expect," said Sturken.
Both CEOs offered positive comments on the merger, which Sturken admitted has been in the works to some extent since his arrival in Grand Rapids in 2003.
"This is good news for our community, for our customers and for our associates," Blease said. "While it is far too early for us to say what the fully integrated company will look like, we can say with great certainty that it will reflect the needs and preferences of our customers."
It will also reflect a $200 million boost to Spartan's $2 billion in annual sales. That figure represents a 22 percent increase in Spartan's retail business. The companies did not release the purchase price or any other specifics about the transaction. However, recent activity by Spartan may suggest at least a price range. Last week, the company reorganized its standing credit, known as its Senior Secured Credit Facility, increasing its borrowing limit by $10 million. The new terms also include "a $15 million Term B loan … which may be drawn upon at Spartan's option."
Although offering no confirmation that the purchase price falls within that $15 million band, Spartan Vice President of Corporate Affairs Jeanne Norcross did comment on the timing of the credit increase.
"The purpose of the financing is not linked specifically to this agreement; however, acquisitions were certainly part of the reason for refinancing and generating the additional availability," she said.