October 31, 1996 Contact: Chris Ahearn
(704) 633-8250, Ext. 2892
For Immediate Release
FOOD LION, INC. TO ACQUIRE KASH N' KARRY FOOD STORES, INC.
IN TRANSACTION VALUED AT $341 MILLION
-- Financial Resources, Buying Efficiencies
and Technological Leadership of Food Lion Will Make Kash n' Karry
a Stronger Competitor in West Central Florida --
-- "Will Benefit Consumers in West Central Florida Because More
Competition Means Lower Prices and Continued High-Quality Customer Service
for Everyone,"
Says Food Lion President and CEO Tom Smith --
-- "Gives Us Access to the Capital We Need to Accelerate Our
Store Remodeling Program and Grow Our Business,"
Says Kash n' Karry Chairman and CEO Ronald Johnson --
SALISBURY, NC and TAMPA, FL, OCTOBER 31, 1996 -- Food Lion, Inc.
(Nasdaq-NNM: FDLNA, FDLNB), of Salisbury, North Carolina, one of
the nation's ten largest supermarket chains with more than 1,100
stores in 14 states, and Kash n' Karry Food Stores, Inc. (Nasdaq-
NNM: KASH), of Tampa, Florida, with 100 food stores and other
facilities in West Central Florida, today announced that they
have signed a definitive agreement under which Food Lion will
acquire Kash n' Karry in a transaction valued at approximately
$341 million.
Under the transaction, holders of Kash n' Karry common stock will
receive $26.00 in cash per share, and Food Lion will also
refinance $221 million of Kash n' Karry's existing long-term
debt. Kash n' Karry's Board of Directors has unanimously
approved the transaction and recommended approval and adoption of
the merger by Kash n' Karry's shareholders. PaineWebber
Incorporated rendered a fairness opinion to Kash n' Karry's Board
of Directors and is acting as financial advisor to Kash n' Karry
in connection with the transaction. The companies also said that
certain institutional investors who together own more than 51% of
Kash n' Karry's common stock outstanding have committed to
support the transaction and have granted proxies and options on
their shares in favor of Food Lion.
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Food Lion expects that, as contemplated synergies and operational
improvements take effect, the transaction will increase Food
Lion's earnings per share in the future.
Tom Smith, President and Chief Executive Officer of Food Lion,
said: "This agreement will enhance competition in West Central
Florida by putting the financial resources of Food Lion behind
the Kash n' Karry name, enabling Kash n' Karry to position itself
more effectively as a viable competitor with the area's major
supermarket chains. This will benefit consumers in West Central
Florida because more competition means lower prices and continued
customer service for everyone."
"This transaction is consistent with Food Lion's stated corporate
goal of growing the company prudently through a combination of
internal expansion and acquisitions," Smith said.
Commenting on the transaction, Kash n' Karry Chairman and Chief
Executive Officer Ronald Johnson said: "We are really excited
about this agreement. While allowing us to continue operating
our stores under the Kash n' Karry banner, it gives us access to
the capital we need to accelerate our store remodeling program
and grow our business. It also allows us to take advantage of
Food Lion's lower cost of capital based on its strong credit
ratings, buying efficiencies and industry leadership in
technology, which we expect to produce cost savings that we plan
to share with our 1.1 million weekly shoppers. And Food Lion
clearly values the contribution that our 9,300 associates have
made to deliver on our total commitment to freshness, high
quality, and customer service."
Food Lion said that it plans to invest up to $150 million to
remodel and upgrade Kash n' Karry stores in the first four years
following completion of the transaction, with funds primarily
derived from Kash n' Karry's cash flow from operations. Food
Lion and Kash n' Karry have found that remodeled and upgraded
stores generally achieve significantly increased sales.
The parties intend to complete the transaction as expeditiously
as possible. Consummation of the transaction, which is subject
to approval by holders of a majority of the outstanding shares of
Kash n' Karry, the expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and other customary closing conditions, is expected to occur
later this year or early next year.
In connection with this transaction, Food Lion has received an
underwritten bank commitment from Chase Manhattan Bank, which
will arrange and syndicate a new credit facility that will
replace Food Lion's current borrowing facility and provide
financing for the transaction. Chase Securities Inc. is Food Lion's
financial advisor for the transaction.
For the 36 weeks ended September 7, 1996, Food Lion reported
sales of $6.2 billion, EBITDA of $409.4 million, and net income
of $139.4 million. Food Lion is one of the nation's ten largest
supermarket chains, with 1995 sales of $8.2 billion and net
income of $172 million. Food Lion and its
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more than 72,000 employees serve more than nine million customers
per week by providing Extra Low Prices and More at 1,100 stores
in 14 states.
For the fiscal year ended July 28, 1996, Kash n' Karry reported
sales of $1.02 billion, EBITDA of $56.8 million, and net income
of $2.0 million. Kash n' Karry operates 100 food stores in West
Central Florida. With more than 9,300 employees, it is one of
Tampa Bay's largest employers.
"Safe Harbor" Statement Regarding Forward-looking Information or
Statements:
All forward-looking information or statements in this news
release concerning either or both Food Lion, Inc. and Kash n'
Karry Food Stores, Inc. are based on the current knowledge of the
respective management's of the two companies of factors affecting
either or both of their respective businesses, all of which are
subject to inherent risks and uncertainties that could cause such
statements to prove incorrect. Among the risks that may have a
bearing on such forward-looking statements are fluctuations in
the economy generally and in the localities of the two companies'
stores, competitive developments including the entry of new
competitors, and the ability to realize the synergies,
operational improvements and expected cost savings in a timely
manner. Investors should review other disclosures as set forth
in documents filed by each of the two companies with the
Securities and Exchange Commission.