The Baltimore Sun: “Weis Markets expands, buying 38 Food Lion stores, including 21 in Maryland”

Weis Markets is expanding in the Mid-Atlantic with the purchase of 38 Food Lion stores, including half a dozen in the Baltimore region, as Food Lion’s parent company looks to unload stores to satisfy antitrust regulators as part of its merger with the parent company of Giant Food.

Food Lion parent Delhaize Group and Giant owner Ahold said Thursday they would sell 86 stores in the United States, including many in Maryland, in an effort to gain approval for their merger from the Federal Trade Commission, the only remaining hurdle before the deal’s anticipated closing later this month.

The $29 billion merger, announced last summer, would create one of the largest supermarket chains in the U.S. and Europe.

“Selling stores is a difficult part of any merger process, given the impact on our associates, customers and communities in which we operate,” said Frans Muller, president and CEO of Belgium-based Delhaize, in a statement.

Muller said the companies “made every effort to identify strong buyers” for their stores.

There are 21 Maryland stores among the 38 Food Lions that Weis Markets plans to buy. Others are in Delaware and Virginia. The acquisition would further expand the Pennsylvania retailer’s presence in the state, following its May announcement of the acquisition of five Mars Super Markets in the Baltimore region.

“I would look for Weis Markets to become a bigger, more dominant player in our market,” said Jeremy Diamond, director of the Diamond Marketing Group, a Baltimore-based food retail consulting firm. “They run a great company, they don’t have any debt — that’s rare for a grocer. They’ve been wanting to expand and pushing to expand.”

Weis expects to convert its new stores in September and October, according to a news release issued by the retailer. The 21 Maryland Food Lion locations slated to become Weis Markets include stores in Columbia, Edgewater, Eldersburg, Elkridge, Owings Mills and Reisterstown.

“This transaction provides us the opportunity to expand into markets that are contiguous to our current trade area, particularly in Maryland where we are adding 21 stores — essentially doubling our store count in a state where we have steadily grown in recent years,” said Jonathan Weis, the chairman, president and CEO of Weis, in a statement.

Though Weis is positioning itself to take a larger share of the Maryland market, the Pennsylvania-based grocer’s growth is unlikely to shake Giant’s dominance, Diamond said.

Giant generated $1.4 billion in sales from 42 Baltimore-area stores between April 2015 and May 2016, which accounted for nearly one-third of the area’s $4.25 billion in supermarket sales, according to analysis by Food World, a trade journal based in Columbia.

The 86 stores being divested represent 4.1 percent of the two companies’ combined U.S. store count, leaving close to 2,000 stores and 200,000 employees.

Weis, meanwhile, was the sixth-largest supermarket chain in the Baltimore area, with $280 million in sales here, according to Food World.

Minnesota-based Supervalu is buying 22 Food Lion stores, including five in and around Hagerstown that will be made into Shop ‘n Save stores.

Only one Giant store, a Salisbury location to be acquired by New Albertson’s Inc., is among the 86 Delhaize and Ahold are selling.

The two companies were required by the FTC to close stores whose territory overlapped, and favored Giant, with its strong market position and reputation, over lesser-known, less profitable Food Lion in Maryland, said Jeff Metzger, publisher of Food World.

“Size matters, volume matters,” Metzger said. “It’s kind of no contest when you take stores that are generally half the size of a Giant and the FTC says, ‘Pick one.’ The choice was rather clear.”

In June 2015, Delhaize and Netherlands-based Ahold announced plans to merge, creating a retailer with more than 6,500 stores in the U.S. and Europe. In the U.S., Delhaize operates Food Lion and Hannaford stores, and Ahold operates Giant and Stop & Shop stores. The deal was intended to strengthen the two companies to better compete against both low-cost operators like Walmart and high-end retailers such as Wegmans, which have been gaining market share in recent years.

Source: http://www.baltimoresun.com/business/bs-bz-weis-food-lion-20160714-story.html