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Food Lion courts Bi-Lo

Majority-purchase offer is extended

Journal wire report

Published: October 7, 2009

Updated: 10/06/2009 09:30 pm

CHARLOTTE

After decades of serving shoppers, a familiar Carolinas grocery name could soon disappear from the landscape: Bi-Lo, which filed for Chapter 11 bankruptcy this spring, may be sold to Food Lion.

Food Lion, based in Salisbury and part of the Delhaize Group, a Belgian retailer, announced Monday that it is offering $425 million in cash for "a substantial majority" of Bi-Lo. If the deal goes through, it will almost certainly lead to consolidation and closures in areas where Food Lion and Bi-Lo stores are near each other, analysts said. Bi-Lo pulled out of the Triad in 2005.

Bi-Lo, based in Mauldin, S.C., has 214 stores and employs about 15,500 people in the Carolinas, Georgia and Tennessee. Food Lion has stores in those states and seven others.

The two companies declined to provide details on the proposal Monday, saying that it still must receive approval from a federal bankruptcy court. Other offers are also still a possibility.

In areas where a combined Food Lion/Bi-Lo would dwarf competitors, the company may have to divest stores. Remaining locations would likely be rebranded as Food Lion, Bloom or Bottom Dollar stores, they said.

Although Harris Teeter and Wal-Mart have carved out well-defined niches serving higher-end and bargain-hunting customers, Bi-Lo has struggled to find its place in the middle. The company has also endured unstable ownership: Once part of Dutch retailing giant Ahold, it is now owned by a private-equity company.

"Bi-Lo needed a white knight to come in," supermarket consultant Matthew Casey said. "They weren't going to continue as they were."

Though Bi-Lo has positioned itself as slightly more upscale than Food Lion -- and tends to operate larger stores -- the two chains are traditional grocers that serve similar customer bases, said Lorrie Griffith, the editor of the Shelby Report, an industry publication. That makes them a good fit together, she said.

Buying Bi-Lo would help Food Lion remain competitive, giving it greater buying power and strengthening its presence in South Carolina , supermarket consultant David Livingston said. But that alone isn't going to propel it past Harris Teeter and Wal-Mart in the Charlotte market, he said.

Bi-Lo and Food Lion "are not in the same league as Harris Teeter or Wal-Mart," he said. "When you have average combining with average, you're still going to get average."

The next steps for Bi-Lo will play out in U.S. Bankruptcy Court in Spartanburg, S.C. There, Judge Helen Burris will weigh proposals for its future, with the aim of providing the most value to Bi-Lo's creditors and other constituencies.