July 23, 2013
Will Spartan + Nash Finch Make For a Stronger Company?
Spartan Stores and Nash Finch announced yesterday that the two organizations have entered into an agreement to merge in an all-stock deal valued at $1.3 billion. When combined, Spartan shareholders will own roughly 58 percent of the company and Nash Finch shareholders will get the rest.
Terms of the deal might be surprising to some as Nash Finch is a larger company than Spartan. According to MLive.com, however, Nash Finch has been losing money.
"The outlook for both companies was quite similar," Scott Mushkin, an industry analyst with Wolfe Research, told the Star Tribune. "They were very well managed, but still not going anywhere."
Combined, the two grocery wholesalers will have 22 distribution centers in 37 states and Washington, D.C. The company will also have operations in Puerto Rico, Europe, Cuba, the Azores, Bahrain and Egypt. The two also operate 177 company-owned stores under the under the Family Fresh Market, Econofoods, Family Thrift Center, No Frills, Bag ‘n Save, Avanza, Sun Mart, Family Fare Supermarkets, Glen’s Markets, D&W Fresh Markets, VG’s Food and Pharmacy and Valu Land banners.
Spartan’s CEO Dennis Eidson will lead the new company with Nash Finch CEO Alec Covington serving as an advisor during the transition.
"By combining our resources, expertise and talent, we will become a stronger and more efficient organization with an enhanced ability to leverage our size, geographic reach and hybrid business model to better compete in the evolving grocery industry, said Mr. Eidson in a statement. "The scale of the combined company will provide efficiencies and savings in purchasing and strengthen our ability to serve our independent retail customers, military commissaries and exchanges and retail consumers."
Mr. Eidson is projecting the merger will create $50 million in savings as redundancies are eliminated.
- Spartan Stores Merging with Nash Finch – Progressive Grocer
- Spartan Stores and Nash Finch to Combine to Create One of the Leading Grocery Wholesale and Retail Operators in the U.S. – Spartan Stores, Inc.
- Why Spartan Stores will own bigger Nash Finch in merger deal, not vice versa – MLive.com
- Nash Finch deal reflects a shrinking industry – Star Tribune
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Recent Discussions
Discussion Questions
How significant a deal is the Spartan/Nash Finch merger in wholesale grocery circles? Do you expect to see further consolidation among grocery wholesalers? What do you see as the relative strengths and weaknesses of the two companies and what will Dennis Eidson and company have to do to achieve success?
Poll
Nash Finch had been put in a difficult situation over the past few years. Corporate stores have been closing by the bushel. There were failed attempts at Hispanic stores and limited assortment stores. They were forced to buy up some of their independent retailers or be forced to shutter distribution centers. When you are not a good retailer to begin with, this isn’t what you want to be doing.
Nash had even been losing major accounts to Spartan. Spartan has had its struggles but was a survivor against Meijer and Walmart. Obviously there will be a reduction in redundancies. Expect a few wholesale customers to defect. Spartan is much stronger when it comes to retail operations and of course my favorite, market research, employing some of the industry’s best. I really don’t expect growth. Walmart and Meijer are doing all the growing right now. The benefit will be the reduction in savings and economies of scale.
Sometimes companies have to run faster just to keep up. The Spartan/NF merger allows the resulting company run faster … but not much more.
There’ll be more consolidation among grocer wholesalers just to survive—and test their ingenuity—as their industry is shrinking and is now under assault.
Dennis Eidson and company will have to redefine their industry’s direction and goals to achieve sustaining success in the future.
Another sign of the times. For Nash Finch it was almost inevitable that it found a home or just eroded away. For Spartan, it saves them the expense of battling on one more front and may open up some scale opportunities.
Gene Hoffman is spot on, the consolidations will continue as the entire supply chain continues to evolve and redefine itself.
As far as what Dennis Eidson needs to do, I’d say it’s way past time to build a better mousetrap.
A look at the company financials in play here will demonstrate that this merger is only providing a limited amount of additional time to the end of an era. In order to survive the terminal effects of voracious big boxes moving into new territories, it is important to branch out for help against the giants. The use of buying cooperative efforts with non competitors is a good first step to set the standards for building a larger business through mergers over greater territory without the risk of not knowing a market. When you absorb a direct competitor the competitors clients are up for grabs and inclined to visit the rest of the competition first for an assortment of reasons.
With that said, perhaps this really is necessary because of the financial pressures brought on by current market distresses. As for myself, I see this move as not only predictable, but also very unimaginative and even a little timid. Another reason for a merger going like this is the huge pressures put in play by the company banks. Banks all over the world are sick of bleeding from investment loses, particularly real estate loses brought on by failing and/or shrinking businesses. The glut of worthless commercial property is forcing banks to leverage financial business investment capitol in a way that protects them from adding commercial property(s) to the ballooning inventory levels.
These concerns should be identified quickly and steered away from by businesses of all types. But that’s just what I think.
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Nash Finch had been put in a difficult situation over the past few years. Corporate stores have been closing by the bushel. There were failed attempts at Hispanic stores and limited assortment stores. They were forced to buy up some of their independent retailers or be forced to shutter distribution centers. When you are not a good retailer to begin with, this isn’t what you want to be doing.
Nash had even been losing major accounts to Spartan. Spartan has had its struggles but was a survivor against Meijer and Walmart. Obviously there will be a reduction in redundancies. Expect a few wholesale customers to defect. Spartan is much stronger when it comes to retail operations and of course my favorite, market research, employing some of the industry’s best. I really don’t expect growth. Walmart and Meijer are doing all the growing right now. The benefit will be the reduction in savings and economies of scale.
Sometimes companies have to run faster just to keep up. The Spartan/NF merger allows the resulting company run faster … but not much more.
There’ll be more consolidation among grocer wholesalers just to survive—and test their ingenuity—as their industry is shrinking and is now under assault.
Dennis Eidson and company will have to redefine their industry’s direction and goals to achieve sustaining success in the future.
Another sign of the times. For Nash Finch it was almost inevitable that it found a home or just eroded away. For Spartan, it saves them the expense of battling on one more front and may open up some scale opportunities.
Gene Hoffman is spot on, the consolidations will continue as the entire supply chain continues to evolve and redefine itself.
As far as what Dennis Eidson needs to do, I’d say it’s way past time to build a better mousetrap.
A look at the company financials in play here will demonstrate that this merger is only providing a limited amount of additional time to the end of an era. In order to survive the terminal effects of voracious big boxes moving into new territories, it is important to branch out for help against the giants. The use of buying cooperative efforts with non competitors is a good first step to set the standards for building a larger business through mergers over greater territory without the risk of not knowing a market. When you absorb a direct competitor the competitors clients are up for grabs and inclined to visit the rest of the competition first for an assortment of reasons.
With that said, perhaps this really is necessary because of the financial pressures brought on by current market distresses. As for myself, I see this move as not only predictable, but also very unimaginative and even a little timid. Another reason for a merger going like this is the huge pressures put in play by the company banks. Banks all over the world are sick of bleeding from investment loses, particularly real estate loses brought on by failing and/or shrinking businesses. The glut of worthless commercial property is forcing banks to leverage financial business investment capitol in a way that protects them from adding commercial property(s) to the ballooning inventory levels.
These concerns should be identified quickly and steered away from by businesses of all types. But that’s just what I think.