Associated Grocers to buy Homeland assets

Journal Record, The (Oklahoma City), Jun 26, 2002

OKLAHOMA CITY (JR) -- An agreement was reached Tuesday for Associated Wholesale Grocers Inc., of Kansas City, Kan., to acquire substantially all the assets of Homeland Stores Inc., including the 44-store grocery chain.

The offer, valued at $47 million, is part of a reorganization plan that would lead to Homeland's emergence from Chapter 11.

Under the plan, which still must be approved by the U.S. Bankruptcy Court for the Western District of Oklahoma, payments would be made to secured and unsecured creditors. No payments, however, are planned for Homeland shareholders.

Homeland's stock closed Tuesday at 4 cents, up 1 cent. The 52- week high is 37 cents and the 52-week low is 1 cent.

The plan was filed with the U.S. Bankruptcy Court for the Western District of Oklahoma late Tuesday.

Under the plan, Associated Wholesale Grocers would continue to operate the newly acquired stores under the Homeland name.

"If everything goes through the court as planned, they would belong to a wholly owned subsidiary of (Associated Wholesale Grocers)," said spokesman Steve Dillard.

It's too early to tell, however, if all employees will be retained, he said. "It's just too preliminary."

Associated Grocers, a 76-year-old retailer-owned cooperative, has been working with Homeland as a supplier and participant in the latest financing arrangements, supplying about 70 percent of the products sold at Homeland stores.

"The proposed transaction is expected to involve substantially all the remaining stores and assets of Homeland," Associated said in a press release.

"(Associated Wholesale Grocers') involvement in our current financing arrangements has allowed us to move in a strategic and effective manner through the reorganization process," said David B. Clark, Homeland president and chief executive.

Over the past 10 months, Homeland has divested itself of stores in other states, concentrating on Oklahoma. It has 44 stores left in operation.

As a result of this reduction, according to a company press release, the company reported stable sales in the first quarter, earning a $685,000 operation profit before consideration of reorganization expenses.

Those 44 stores will continue to operate under the Homeland name, but owned by Associated Wholesale Grocers.

Homeland had 78 stores when it filed for bankruptcy in early August. The stores included 65 in Oklahoma with the remainder in the Amarillo, Texas, market and Kansas.

In September, Homeland announced plans to close eight stores -- seven in Oklahoma and one in Texas. In December, Homeland said it would sell or close an additional 26 stores, including its remaining stores in Texas and Kansas.

Customers initially will not notice any change in operation as the new owner takes over, according to a company spokesman.

"It will be a transparent move," he said. "Nothing initially will be changed."

Although most store personnel will be retained, it's not known what will happen to the officers and senior executives. "There are details still to be worked out," the spokesman said.

It's not known when the deal will be finalized, but "we would like to bring (it) to finalization as quickly as possible," Clark said.

Associated Wholesale Grocers, which supplies 850 retail grocery stores in 10 states. also owns and operates a distribution center in Oklahoma City with about 300 employees. The center did belong to Homeland.

Associated purchased the distribution center and 29 Homeland stores in May 1995.

Homeland was formed in 1987 to buy the 106-store Oklahoma Division of Safeway Stores Inc.