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Why Winn-Dixie is being sold to Bi-Lo

Three story lines about how Bi-Lo's owners agreed to buy Winn-Dixie Stores Inc. for $559 million are fleshed out in a recent SEC filing:

•Winn-Dixie had been fielding unsolicited offers from Dallas-based Lone Star Funds and its Greenville, S.C.-based Bi-Lo supermarket chain for almost a year. The offers peaked at $10.50 a share until talks were dropped when Winn-Dixie's stock price collapsed in November to $6.39. Winn-Dixie is selling for $9.50 a share, a 79 percent premium to the day the deal was struck Dec. 16. Goldman Sachs got $7 million to shop Winn-Dixie to six other prospects, but fielded only one other offer.

•Projections that Winn-Dixie will not be profitable for another one to three years led the board to sell. With 207 stores in four Southeast states, Bi-Lo plans to maintain Jacksonville-based Winn-Dixie, with 484 stores in five other adjacent Southeast states, as a separate brand after the sale is approved by Winn-Dixie shareholders. The sale is expected to close March 31.

•Thanks to an employment contract, Peter Lynch, the chief executive who steered Winn-Dixie in and out of bankruptcy for six years, will get $8 million in walking-away money, including cash from selling his stock and options. He stands to get up to $1.5 million more as a post-sale consultant. Board members will pocket $419,000 to $541,000 each for their shares.

"Noooo" JCPenney ads on TV How can J.C. Penney Co. drop most prices 40 percent all the time for its new "Fair and Square" pricing yet not expect sales overall to nosedive?

Simple. Few (only 1 percent of Penney transactions) were paying full price in 2011, while 72 percent went for at least half off, according to a primer on rampant department store promotional sale pricing delivered by Penney chief executive Ron Johnson.

The wholesale cost of its average item has not budged from about $10 since 2002. Yet, while the full asking price jumped 43 percent to $40 last year, consumers actually spent only $15.95, just 15 cents more than 10 years ago.

"We're no different than what's happened at other department stores," Johnson said. "You can keep raising prices (to make the discounts sound deeper), but the customer knows the right price."

Meantime, Penney will save $300 million in ad money and millions more in workers' time by reducing its promotional sale calendar from 590 events a year to 12.

Fannie May comeback Eight years after going toes up in Florida, Fannie May candy shops — a staple of the Chicago boxed chocolates scene since 1920 — are coming back.

The first franchised Florida store just opened in Sarasota with more to come this year from Naples to Orlando. Tampa Bay is being marketed for eight to 10 franchised locations. In addition to the old standby Pixies, Mint Meltaways and Trinidads, Fannie May also signed a deal to stock gourmet (read: $2.50 each) Norman Love chocolates from the well-known Fort Myers confection artist.

"We're a natural, given Florida's connections to Chicago and the Midwest," said Dave Taiclet, who resurrected the brand from bankruptcy, rebuilt it to 91 stores and still runs it after selling the chain to 1-800-Flowers.com Inc.

The chocolates, however, are now made in North Canton, Ohio.

Mark Albright can be reached at albright@tampabay.com or (727) 893-8252.

Why Winn-Dixie is being sold to Bi-Lo 01/30/12 [Last modified: Tuesday, January 31, 2012 3:48pm]
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