Bi-Mart seeks independent future - discount retailer hoping to become independent of owner Thrifty PayLess Holdings

Discount Store News, Nov 4, 1996 by Robert Scally

EUGENE, ORE. -- Bi-Mart intends to forge ahead either with the help of an outside investor or a management leveraged buyout when it is sold as a result of Rite Aid's purchase of Thrifty PayLess Holdings, its current owner.

Bi-Mart has been sold in several deals during the past 12 years, but the 45-unit membership club retailer has always remained a subsidiary of a much larger firm.

That type of stewardship may have run its course, according to president and ceo Marty Smith.

"I think this time it could be different and that we could be spun off separately and become an independent company," Smith told DSN. "A probable scenario would be an investment banking group [acquisition] or management LBO."

No specific plans are in place yet, he said.

Rite aid announced last month that it will will seek a buyer for Bi-Mart, which has annual sales of about $350 million. Rite Aid, which is acquiring Thrifty PayLess for about $1.4 billion, has not indicated how much it expects the sale of Bi-Mart to fetch. The Rite Aid deal must still clear regulatory hurdles, and Rite Aid officials expect Federal Trade Commission approval within 60 days of the Oct. 15 announcement of the acquisition.

Years of operating the company within other larger companies have stunted the 41-year-old company's growth, Smith contends. In 1996, Bi-Mart is adding just two new locations: Vancouver, Wash., and Portland, Ore.

The company is carrying on with plans to open another five stores during 1997, he said.

"We've stayed on course through all of these sales, we just haven't been able to grow the company the way we would have liked," Smith said.

On the other hand, most of the companies that owned Bi-Mart tended to ignore it, allowing it to develop on its own no matter how slowly, Smith said. He's confident that Bi-Mart can prosper in a future that may not include a giant coprorate master.

"We've always been profitable and able to pull our own weight," Smith said.

Selling the company to an investment company or management group makes sense at this time because Bi-Mart's unique retailing concept makes it somewhat of an odd-ball in the industry.

Hard goods-oriented, the chain supplements its core assortments with greeting cards, lawn & garden, packaged foods, a pharmacy and a photo lab--all in a no-frills merchandising presentation. Bi-Mart charges a $5 fee for a lifetime membership, and stores average 31,000 sq. ft. and carry about 42,000 skus. Bi-Mart currently counts 1.2 million families as members, Smith said.

The company's customers are loyal, satisfaction is high, it has low turnover rates among its employees and one of the lowest pilferage rates in the industry, Smith said.

Founded in 1955, Bi-Mart patterned itself in part after Fedco, Smith said.

Under the circumstances, it would be understandable if Smith was concerned about the future of his company and his job. But Smith, who has been with Bi-Mart for 33 years, said he's rather blase about the whole thing.

"This is the eighth time that this has happened to this company." Smith said. "We've survived all of the sales with all of the different owners, and we always seem to wind up being part of the package."

RELATED ARTICLE: Bi-Mart ownership history

* 1955: Founded as a private held company

* 1976: Sold to Settle-based Pay'n Save

* 1984: Sold to private investor, who turn spun it off briefly to Pacific Corp.

* 1988: Sold to Thrift Corp., a subsidiary of Pacific Enterprises, a utility company.

* 1992: Thrifty & Bi-Mart sold to Green Equity Investors

* 1994: Thrifty merged with PayLess

* 1996: Purchased by Rite Aid as part of Thrifty Payless acquisition Source: Bi-Mart