Fleming Companies Inc has entered into an agreement with Save Mart Supermarkets of Modesto CA for the sale of 26 Fleming-owned Food4Less stores in California, plus two locations under construction.
The company anticipates net proceeds of up to $165 million for these 28 locations. Proceeds are expected to consist of up to $130 million in cash, inclusive of inventory, and a $35 million reduction of long-term liabilities in the form of capital leases. Purchase price is subject to adjustment based on store sales through closing. Upon receipt, the company intends to apply the cash proceeds from this transaction to reduce Fleming's senior secured term loan balance.
Save Mart is a supermarket operator with 97 stores operating in California under the Save Mart, Food Maxx, and S-Mart banners. The transaction is expected to be completed by mid-January 2003 and is subject to customary regulatory approvals and other closing conditions. Save Mart is expected to offer employment opportunities to most of the current Food4Less associates.
The agreement provides that, upon closing of the transaction, Fleming will supply these 28 stores through a five-year supply arrangement with Save Mart. The supply agreement is expected to represent about $385 million in annual sales volume the first year and $340 million for each of the remaining four years, making Save Mart Supermarkets one of Fleming's five largest customers. The stores will be supplied by Fleming Divisions in Sacramento and Fresno CA.
Fleming is continuing to sell its remaining 84 retail locations this quarter and in 2003.
