Spartan Stores, Nash Finch To Merge In $1.3 Bln All-stock Deal

(RTTNews) - Grocery distributor Spartan Stores, Inc. (SPTN) and Nash Finch Co. (NAFC), a leading food distribution firm, Monday announced a definitive merger agreement for the companies to combine in an all-stock merger valued at about $1.3 billion, including existing net debt at each company. Shares of both companies are surging in pre-market activity.

As per the terms of the transaction, Nash Finch shareholders will receive a fixed ratio of 1.20 shares of Spartan Stores common stock for each of their shares. Upon closing, Spartan Stores shareholders will own 57.7 percent of the equity of the combined company and Nash Finch shareholders will own 42.3 percent.

The deal has been unanimously approved by the boards of directors of both companies. It is expected to close by the end of calendar 2013.

Nash Finch's core businesses include distributing food to military commissaries and exchanges and independent grocery retailers in 37 states, the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt.

The combination creates a leader in the grocery wholesale, retail and military commissary and exchange channels with pro forma annual sales of around $7.5 billion. It will have 22 distribution centers covering 37 states and 177 retail stores.

The combined company will also have a portfolio of strong private brands including Spartan Stores' Spartan brand and Nash Finch's Our Family and Nash Brothers Trading Company brands.

Dennis Eidson, CEO of Spartan Stores, said, "This transformational transaction provides a unique opportunity to bring together Spartan Stores' grocery distribution and retail operations in Michigan, Indiana and Ohio with Nash Finch's leading position in grocery distribution to military commissaries and exchanges and its complementary wholesale grocery network throughout the U.S.''

Eidson will serve as President and Chief Executive Officer of the combined company. Alec Covington, President and Chief Executive Officer of Nash Finch, will remain with the combined organization in an advisory role to ensure a smooth transition.

The combined company will include members of each company's management teams and employee bases.

Nash Finch's military business will continue to conduct its operations as it has done in the past and will remain based in Norfolk, VA. Edward Brunot, who currently serves as President of the military business, will continue to lead that business in the combined organization.

Craig Sturken, Chairman of Spartan Stores' Board of Directors, will serve as Chairman of the Board of Directors of the combined company. The board will comprise twelve members, with seven being designated by Spartan Stores and five by Nash Finch.

The combination is expected to achieve $50 million in annual cost synergies by the third full fiscal year of operations. This is expected to be achieved through consolidation of corporate functions, procurement and other operating efficiencies.

Including these synergies, the transaction is expected to be accretive to earnings per share, excluding one-time costs, within the first full fiscal year of operations.

The combined company also expects to continue to return value to shareholders through a dividend which will initially be set at $0.48 per share on an annualized basis.

SPTN, which closed at $21.20 on Friday, is surging 21.60 percent in pre-market activity.

NAFC, which settled at $25.43, is surging 24 percent in trading before the market open.