Bankruptcy court OKs Fleming sale

La Crosse Tribune, Aug 15, 2003 by Cahalan, Stece

A bankruptcy court on Thursday approved the $400 million sale of Fleming Cos.' wholesale grocery division, leaving the oncebooming distributor with a fraction of its previous business.

But two area grocers said later they aren't sure Fleming's La Crosse distribution facilities will remain open under new ownership.

The decision by the bankruptcy judge in Delaware cleared the way for Fleming, based in the Dallas suburb of Lewisville, Texas, to sell its core business to C&S Wholesale Grocery of Brattleboro, Vt. The sale was expected to close Aug. 23.

The ruling also helps clear the way for Supervalu Inc. of Eden Prairie, Minn., to buy Fleming's La Crosse distribution operations.

Supervalu announced Sunday it has agreed to buy Fleming distribution facilities in La Crosse and Waukesha, Wis., and Massillon, Ohio, from C&S, assuming a bankruptcy judge approves the sale of Fleming's wholesale grocery business to C&S. It said the planned purchase from C&S, for an undisclosed price, also is subject to regulatory approval.

Area grocers Dave Skogen of Onalaska, Wis., and Dave Hegenbarth of Galesville, Wis., said Thursday there is no guarantee Supervalu will keep the La Crosse facilities open. They also had no prediction how soon Supervalu might acquire the La Crosse distribution operation.

On Monday, Skogen said he felt it was no longer "a slam dunk" that the La Crosse distribution facilities would remain open, because "There's been some real loss of volume (there) in the past two or three weeks." Skogen, who owns seven Festival Foods stores and two IGA stores, said Thursday his opinion has not changed.

Hegenbarth said Monday he thinks Supervalu would operate the La Crosse facilities rather than close them. "I think it gives them some more reach" into parts of Wisconsin, Iowa and Illinois, he said.

But on Thursday, Hegenbarth said "because of things I've heard out on the street" since Monday, he is no longer sure Supervalu will keep the la Crosse distribution facilities open. "I'm really on the fence now," Hegenbarth said, when asked to predict whether the La Crosse distribution facilities will remain open or will close.

Supervalu spokeswoman Polly Deane said her company had no comment Thursday about the La Crosse facilities.

Supervalu has two distribution centers in Wisconsin - in Green Bay and Pleasant Prairie.

Fleming had said C&S was the only party to make a qualified offer for its wholesale grocery business, but the deal still hinged on approval of the bankruptcy court and financing by C&S.

Fleming already has sold its string of more than 100 stores. The sale to C&S leaves Fleming with only its Core-Mark business of distribution to convenience stores.

A Fleming spokesman said Thursday that the company has not made a final decision whether to sell San Francisco-based CoreMark.

FLEMING COS.' WOES

* SALE APPROVED: On Thursday, a bankruptcy judge approved Fleming Cos.' sale of its grocery business to C&S Wholesale Grocers.

* BANKRUPTCY: Fleming filed for bankruptcy proteciton in April after cutting ties with its largest customer, Kmart Corp. Fleming became Kmart's exclusive distributor for perishable goods in 2001, a deal it valued at $4.5 billion per year. But the coup fizzled when Kmart's fortunes sagged. Fleming cut off deliveries to Kmart when the retailer fell $78 million behind in paying its bills.

* OTHER SUPPLIERS: As questions grew about Fleming's financial health earlier this year, many of its customers made other arrangements for getting supplies.