Food Giant may merge with larger company

SIKESTON, Mo. -- Food Giant Supermarkets is currently in negotiations to be bought for stock by a Kentucky conglomerate. If all goes to plan, the Sikeston, Mo., grocery retailer could be a subsidiary of Houchens Industries by Independence Day.

Food Giant president and CEO Ron Watkins announced Monday that after about 60 days of serious discussion, both companies' boards of directors had approved a nonbinding letter of intent outlining the acquisition of Food Giant by the Bowling Green, Ky.-based Houchens. If approved, the deal will be executed through an exchange of shares in stock. Both companies are completely employee-owned.

"Houchens is more diversified than we are," Watkins said. "I think this will save Food Giant some money."

Houchens is the 106th largest privately owned company in the country according to Forbes Magazine. It operates supermarkets and convenience stores in Kentucky and Tennessee and over 200 limited-assortment grocery stores in 13 states. Houchens is also involved in cigarette retailing, manufacturing and marketing following its purchase of Commonwealth Brands cigarettes in 2001. Overall it employs about 7,800 people and boasts $1.9 billion in annual sales.

Food Giant owns and operates 90 Food Giant and Piggly Wiggly supermarkets in eight Midwestern states. The stores bring in about $400 million annually.

Houchens director of marketing Alan Larsen said the acquisition will be beneficial to both parties.

"It will allow them to expand their markets and take advantage of our synergies," Larsen said. "We can take advantage of their annual sales. It's a perfect fit for our organization and their organization, collectively."

The deal is still contingent upon both companies' boards approving the exchange of shares agreement and appraisals of value for both companies. However, Larsen said he doesn't see anything that would quell the deal.

If the deal does go through, both parties emphasized that with a lack of competition and overlap between the two companies, there will be no changes in current stores, management or other personnel, including Food Giant's approximately 2,500 workers. Watkins also said that Food Giant's home office will remain in Sikeston.

Kenneth Storey of Cape Girardeau founded Food Giant 35 years ago and built it from one store up. He sold the company to an employee stock ownership plan upon retiring March 1, 2000.

trehagen@semissourian.com

335-6611, extension 137