A.L. Price seals deal on Freddy's

Drug Store News, Sept 30, 1991 by James Frederick

A.L. Price seals deal on Freddy's

SUMMARY: The merger of two strong regional deep discounters turbocharges growth for chief executive Bill Edwards, who likes plenty of site opportunities in Florida and upstate New York.

WARREN, Mich. - A.L. Price has finalized its takeover of 24 Freddy's stores in New York and Florida from Melville Corp., the parent company of CVS.

The deal, closed Aug. 27 after more than two months of intensive negotiations, marks the merger of two strong regional deep discount drug chains into a three-state organization with 37 stores doing roughly $25 million in combined business. A.L. Price chief executive Bill Edwards said the deal offered "fantastic" growth opportunities, and termed the Freddy's stores "excellent plants to compete with."

Dick McLean, A.L. Price executive vp, said all headquarters operations and staff would be relocated to the Freddy's headquarters offices in Rochester, N.Y. That includes buying, advertising, accounting, finance and administrative functions, McLean said.

McLean said the company would maintain a regional manager and small support staffs at the A.L. Price central office in Warren, Mich., along with some warehousing. "We'll have a regional manager in all three locations: Michigan, New York and Florida," McLean told Drug Store News.

With the purchase, A.L. Price picks up 15 Freddy's stores in Florida and nine in western upstate New York. However, a handful of Freddy's units in the Richmond and Tidewater markets in Virginia weren't part of the deal; Kmart has since picked up the prescription files from the Tidewater stores and is reported to be negotiating for the files of the Richmond units.

A strong competitor

Founded by entrepreneur Fred Silverstein and later acquired by Melville, Freddy's enjoys a reputation as a strong off-price competitor in some key, fast-growing south Florida markets. Under Melville, however, the chain's growth in the state has been outstripped by that of faster-growing chains like Drug Emporium and Phar-Mor. Phar-Mor is also beginning to move into western New York State.

Given the necessary financing, however, Freddy's new owners may step up the pace. Edwards called the Florida market "a great concentration of stores and real estate opportunities for new growth." He added that New York State also offered plenty of new site growth opportunities that haven't yet been exploited.

"We're not here to take on the F&Ms of the world, and to find new locations in Detroit is difficult for any of us," Edwards said. "We have to look beyond that for new growth opportunities."

At 25,000 to 35,000 square feet, the Freddy's units are similar in size to those of A.L. Price. McLean said there were no current plans to change the store logos, and he said merchandising and format changes would not be dramatic. Most of Freddy's management and support staff will also remain, McLean said, although Silverstein himself will not join the newly merged operation.

"At present, we don't foresee a lot of changes. Freddy's is a good company that already runs very well; they probably do some things a little better than we do. There will be a lot of synergies we can take advantage of."

McLean said one change may be to put more emphasis on seasonal products in the Freddy's units. In addition, A.L. Price may take a page from its own operation and institute limited warehousing of some bulk items and high-quantity deal buys in Florida and New York.

Table : The ALP/Freddy's network

              Locations by state
Florida            New York         Michigan
Boca Raton         Amherst          Allen Park
Boynton Beach      Buffalo          Deerborn
Coral Springs      Cheektowaga      Detroit
Ft. Lauderdale     Rochester (3)    East Detroit
Jensen Beach       Niagara Falls    Grosse Pt. Farms
Lauderdale Lakes   North Syracuse   Madison Heights
Miami (2)          West Seneca      Mt. Clemens
North Miami                         Southfield
Pembroke                            Southgate
Plantation                          Warren (2)
Pompano Beach                       Westland

Seminole Tampa West Palm Beach

Source: A.L. Price