154 former Safeway stores merging in the southwest

Drug Store News, Feb 20, 1989

154 former Safeway stores merging in the southwest

OKLAHOMA CITY - Two former divisions of Safeway Stores have agreed to merge, creating a grocery and combo store chain with sales in excess of $1 billion.

Homeland Stores, formerly the Oklahoma division of Safeway and Oklahoma's largest supermarket retailer, agreed in principle at the end of January to combine its operations with Safeway of Little Rock, Ark. Homeland is a 106-store operation with stores in Oklahoma, the Texas Panhandle and southern Kansas, while the Safeway of Little Rock operates 48 stores in Arkansas.

Their merger will create the strongest supermarket retailer in this part of the Southwest.

The combination will also create a more powerful drug retailing force in those states. Homeland operates pharmacies in 36 of its stores, while the Little Rock chain has 14 supermarket pharmacies. About a dozen Homeland units also feature video rentals.

"We consider pharmacy an important part of our operation," said Homeland president and ceo Max Raydon, who will head the combined chain. He indicated that the merged companies would expand both pharmacy and video operations.

"We anticipate excellent growth opportunities and further investment in store remodeling, including the addition of specialty departments, such as bakeries, delis, pharmacies, video rental and other features," Raydon told Drug Store News.

Homeland was acquired in a leveraged buyout from Safeway in November 1987, by an investor group led by inside management and the investment firm of Clayton & Dubilier. Safeway's Little Rock division was sold in April 1988 to Acadia Partners, a merchant banking firm, in a management-led deal. Acadia, which includes the Robert M. Bass Group among its partners, will retain "a significant stake" in the merged company, according to a spokesman.

Since its LBO, Homeland has displayed an aggressive growth strategy. The chain has spent $15 million to expand and modernize stores, added approximately 1,000 employees and cut its bank debt by $20 million. Raydon said it was too early to predict operational or expansion strategy following the merger.

Principals on both sides expect the transaction to be consummated in March.

PHOTO : Homeland Stores, Safeway of Little Rock to be regional powerhouse