Smith’s Food & Drug, Pricerite parent sold to Kroger

Monday, Oct. 19, 1998 | 11:54 a.m.

It is the latest in a series of mergers sweeping the grocery business.

Kroger doesn't operate in Las Vegas. But Fred Meyer owns the Smith's Food & Drug and Pricerite stores here.

The combined company will operate under the Kroger name and its keep headquarters in Cincinnati. It will have annual sales of $43 billion, 2,200 supermarkets in 31 states and about 300,000 employees.

Both companies' boards of directors have approved the merger. Under its terms, Fred Meyer shareholders will receive one newly issued share of Kroger common stock for each Fred Meyer share. Fred Meyer shareholders will own 38 percent of the combined company.

Kroger is paying about $8 billion for the Portland, Ore.-based Fred Meyer company, and is assuming about $4.8 billion in debt. Fred Meyer recently absorbed Ralphs, another West Coast grocery retailer.

Kroger operates 1,398 food stores, 802 convenience stores and 34 manufacturing plants that supply Kroger stores and outside customers. Fred Meyer operates 800 food and general merchandise stores in 12 western states from Alaska to Texas.

Joseph A. Pichler, Kroger's chief executive and chairman, will retain those titles with the combined company. Ronald W. Burkle, Fred Meyer's chairman, will become chairman of the executive committee of Kroger's board.

Robert G. Miller, vice chairman and chief executive of Fred Meyer, will become vice chairman and chief operating officer of Kroger. David Dillon will continue as Kroger's president.

Fred Meyer is the parent company of Smith's, Ralphs, Food 4 Less and Hughes Family Markets. The merger should clear antitrust regulations because the chains compete against each other only in Arizona -- in Phoenix and Tucson, The Wall Street Journal and Los Angeles Times reported.

Kroger said it expected to close the deal within four months. Federal Trade Commission approval is required.

Merging allows grocery chains to remain competitive with giant mass merchandisers such as Wal-Mart, which sell groceries at discounted prices. Supermarket chains also believe it is more cost-effective to expand by joining forces, rather than building stores in new markets.

Recent mergers include Fred Meyer's purchase of Ralphs and Safeway Inc.'s acquisition of Vons Cos.

Albertson's Inc. has announced plans to buy American Stores Co., which owns Lucky grocery and Sav-on drugstore chains. Safeway announced it is buying Dominick's Supermarkets.

Burkle, who started out as a box boy at Stater Bros. stores to become a billionaire by brokering supermarket chain mergers, engineered the deal that merged Ralphs and Fred Meyer, and Safeway's acquisition of Dominick's.

In connection with the deal, Kroger announced it is rescinding its program of repurchasing its own stock. Kroger and Fred Meyer said each company has been granted options to buy up to 19.9 percent of the other company's common stock under certain conditions.