Fleming plans to sell wholesale business

La Crosse Tribune, Jun 28, 2003 by Cahalan, Steve

Fleming Cos. Inc. said Friday it has signed a letter of intent to sell its wholesale grocery business to C&S Wholesale Grocers Inc. of Brattleboro, Vt., a privately owned company that is the nation's third-largest grocery wholesaler.

La Crosse Mayor John Medinger and local grocers Dave Skogen and Lyle Quillin said the announcement probably is good news.

The letter of intent is subject to execution of a definitive asset purchase agreement. And even if that is reached, there are plans for an auction.

Fleming, which has about 400 employees working at its La Crosse distribution facilities, said it expects to file a motion in U.S. Bankruptcy Court in Delaware to establish the procedures for the sale of its grocery wholesale operations.

The Lewisville, Texas-based company also said it expects to file a definitive binding asset purchase agreement with C&S.

Fleming, which filed for Chapter 11 bankruptcy protection April 1, said Friday it expects to ask the bankruptcy court to set an auction for the sale of the grocery Wholesale business by the end of July. It said it wants the highest or best offer presented to the bankruptcy court for approval in early August.

The two companies said that in a separate arrangement, C&S has agreed to begin supplying Fleming with selected products for distribution to Fleming retail customers.

"My initial reaction (to Friday's announcement) is quite positive," Medinger said. "It seems like (C&S) is a major and successful company in the United States that looks, at least on paper, like they have the ability to deliver the products to their retailers. "

Medinger added, "It seems it might be in the short run and the long run, in the best interests of everybody - the city of La Crosse, Fleming and its workers. "

"It's very early in this process to draw conclusions as to what this is going to look like," said Dave Skogen of Onalaska, who owns seven Festival Food stores and two IGA food stores and uses Fleming as his primary supplier. "However, we're very pleased for the Fleming associates that the warehouse is going to be sold and not closed."

Skogen said neither Fleming nor C&S has told him the La Crosse distribution facilities will remain open if the sale occurs, but he said he anticipates they will continue operating. "We know it's one of the strongest assets (Fleming) has,'' he said. "So it doesn't make any sense to close it."

Skogen noted an auction will be set by the bankruptcy court. He had no prediction whether other grocery distribution companies will submit bids, or whether C&S will have the winning bid.

"There's certainly been other people interested," Skogen said. "But whether they will bid, I don't know."

Skogen said he was surprised C&S stepped forward. "They're kind of an unknown in this part of the country," he said.

"I think it's probably very good for the community and for the people at Fleming," Lyle Quillin, vice president of the La Crosse-based chain of eight Quillin's supermarkets, said of Friday's announcement. "At least now we know or feel that this will be a viable operation in the future. That's good for (Fleming) employees and the community."

Quillin said he is optimistic C&S would keep the La Crosse distribution facilities open. "We think it's always been a very well-run operation," he said.

Quillin was "a little surprised" that C&S stepped forward. "We had heard names of others," before C&S surfaced this week, he said. C&S is "somewhat of an unknown entity in the Midwest," he said.

"We'd rather do business locally if we can," Quillin said. Quillin's has been able to get about 80 percent of what it needs from Fleming, and obtains the rest from the Copps division of Roundy's Inc. Quillin's began using Copps as a secondary supplier several weeks ago, after Fleming was unable to provide everything Quillin's needed.

Ron Buschman, a business agent for Teamsters Local 695 in La Crosse, said it's too soon to know whether Friday's announcement is good news.

"I'd have to see the whole purchase agreement," said Buschman, whose union represents hourly workers at Fleming's grocery distribution facilities in La Crosse. As of late Friday afternoon, he said, the union had not been told what C&S's plans might be for the La Crosse operations.

"Nothing changes in terms of operations today, with the obvious exception we are beginning a supply arrangement with C&S which is expected to improve our inventory levels, which is important to our ability to serve our eustomers as we work through this process," spokesman Shane Boyd said from Fleming headquarters.

Boyd said Friday's announcement "certainly means that by early August, we may have a final arrangement for a new owner for the La Crosse division, as well as the rest of our wholesale distribution business."

C&S said the acquisition would allow it to expand its business into parts of the country where it does not operate.

A C&S spokesman was not available for comment Friday.