Southeastern Grocers Inc. (SEG), parent company of Fresco y Más, Harveys Supermarket and Winn-Dixie grocery stores, announced August 16 that it has entered into definitive agreements with Aldi and Fresco Retail Group, LLC to effectuate a comprehensive strategic divestiture of its businesses. Financial terms of the agreements were not disclosed.
Southeastern Grocers is controlled by three private equity firms – Fidelity Investments, Osterweis Capital Management, Millstreet Capital Management LLC and Lone Star Funds, which has been connected to the Winn-Dixie name since 2007.
Under the proposed merger agreement, which is scheduled to be completed in the first half of 2024, Aldi will acquire all outstanding SEG capital stock in an all-cash transaction, which encompasses all SEG grocery operations under the Winn-Dixie and Harveys Supermarket banners. This includes approximately 400 stores in Alabama, Georgia, Louisiana, Mississippi and Florida where 75 percent of the stores are located. When completed, Aldi will be the second largest grocery retailer (measured by store count) in the U.S. with about 2,800 stores, which places it behind Walmart’s more than 5,000 U.S. retail units.
Following the completion of the sales process, Aldi will serve the customers and communities of Winn-Dixie and Harveys Supermarkets through the continued operation of the banners’ existing stores. The retailer will also evaluate which locations will be converted to the Aldi format. For those stores that are not converted, Aldi intends for them to continue to operate as Winn-Dixie and Harveys Supermarket stores. The stores that will remain bannered as Winn-Dixie and Harveys will be the German discounter’s first conventional supermarket operation since it first entered the U.S. in 1976.
Concurrently, SEG has agreed to divest its Fresco y Más operations. SEG anticipates that the sale of the Fresco y Más banner will be consummated in the first quarter of 2024. The Fresco y Más banner, including all 28 stores and four pharmacies, will be sold to Fresco Retail Group, LLC, an investment group strategically focused on food and grocery. Fresco Retail Group, LLC plans for all stores and pharmacies in the Fresco y Más banner to continue operating as they are presently.
Anthony Hucker, president and CEO of SEG since 2017, said, “Our successful transformational journey has created a unique opportunity with leading partners who share our vision and common commitments to creating value for their customers. We believe these next steps will fuel a phenomenal experience for our customers, new opportunities for our associates and increased value for our shareholders. As the sales processes proceed, we’ll stay acutely focused upon delivering the exceptional quality, service and value that our customers and communities have come to expect from us.”
“Like Aldi, Winn-Dixie and Harveys Supermarket have long histories and many loyal customers in the Southeast, and we look forward to serving them in the years to come,” Aldi U.S. CEO Jason Hart said. “The time was right to build on our growth momentum and help residents in the Southeast save on their grocery bills. The transaction supports our long-term growth strategy across the United States, including plans to add 120 new stores nationwide this year to reach a total of more than 2,400 stores by year-end.
“Aldi will operate Winn-Dixie and Harveys Supermarket stores with the same level of care and focus on quality and service, as we also evaluate which locations will convert to the Aldi format to better support the neighborhoods we’ll now have the privilege of serving,” Hart commented. “For those stores we do not convert, our intention is that these continue to operate as Winn-Dixie and Harveys Supermarket stores.”
The decision to acquire Winn-Dixie and Harveys is a strong indicator that Aldi intends to prioritize growth in the Southeast, particularly Florida, where it currently operates approximately 210 stores in the Sunshine State. Earlier this year, The Batavia, IL-based limited assortment merchant opened a new 564,000 square foot distribution center in Loxley, AL.
Lone Star Funds has been trying to unload SEG since it emerged from Chapter 11 bankruptcy in 2018. In late 2020, SEG announced it was planning an initial public offering that would have taken the retailer public. That plan fell apart within several months.
In two separate transaction in June and September 2020, SEG sold 85 Bi-Lo and Harveys stores and a distribution center were sold to Ahold Delhaize USA, which effectively ended Bi-Lo’s run as a grocery entity. Harveys 25 stores in Georgia and Florida remain operational. Ironically, Ahold USA owned the Bi-Lo stores until it sold them to Lone Star in 2005. Today, those stores operate as Food Lion units.
The merger agreement has been approved by the holders of a majority of SEG’s outstanding shares, and the merger is expected to close in the first half of 2024, subject to regulatory approvals and customary closing conditions. SEG will continue to operate its respective banners and stores in the normal course of business up to and until the transactions are completed.
RBC Capital Markets, LLC served as financial advisor to SEG. Willkie Farr & Gallagher LLP was transaction counsel and Kirkland & Ellis LLP served as antitrust counsel to SEG.