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    Spartan to Buy Felpausch Food Centers

    GRAND RAPIDS, Mich. -- Making good on previously stated plans to grow through prudent acquisitions in the Midwest, Spartan Stores, Inc. here said yesterday it had agreed to purchase 20 retail grocery stores, two fuel centers, and three convenience stores from G&R Felpausch Co., a family-owned grocer founded in the 1930s.

    GRAND RAPIDS, Mich. -- Making good on previously stated plans to grow through prudent acquisitions in the Midwest, Spartan Stores, Inc. here said yesterday it had agreed to purchase 20 retail grocery stores, two fuel centers, and three convenience stores from G&R Felpausch Co., a family-owned grocer founded in the 1930s.

    The wholesaler said it planned to upgrade the stores, improve their performance, and squeeze operational synergies from the operations as well. The deal will expand Spartan's supermarket store base 29 percent to 88 stores, and total store base to 111 units, the company said.

    Financial terms of the deal, which is expected to close by the end of the 2008 fiscal year's first quarter, weren’t disclosed. However, Spartan said the purchase could increase annual retail segment sales by about $200 million.

    The family-held, Hastings, Mich.-based Felpausch has been a distribution customer of Spartan Stores for over 50 years.

    It was unclear at presstime if the acquired supermarkets, which include the operations of nine in-store pharmacies, would continue to trade as Felpausch or be converted to other Spartan banners.

    The proposed acquisition follows on the heels of Spartan's successful acquisition of D&W stores last year.

    "Sustained profitable growth through prudent retail acquisitions is a component of our ongoing and core business strategy," said Craig Sturken, Spartan Stores' chairman, president, and c.e.o.

    Sturken said the Felpausch stores "serve many communities where we currently have no retail presence. They also provide an outstanding geographic fit with our current retail store footprint, while providing expansion into central Michigan.

    "The Feldpausch family has been one of our best and most loyal distribution customers for more than 50 years, and we are fortunate to have been associated with them," added Sturken.

    Sturken said Spartan intends to "unlock the significant long-term performance potential of these stores," through upfront capital investments, promotions, and merchandising programs, as well as investments in associates along with the anticipated operational synergies.

    Mark Feldpausch, chairman and chief executive of Felpausch Food Centers, said the transaction will benefit consumers by bringing together "two premier Michigan grocery store operators," adding, "This transaction strengthens the market position of a leading conventional grocery store operator…one of the best conventional retail supermarket chains in the local market."

    Goldsmith Agio Helms, an investment banker behind Felpausch in the deal, said its client's grocery stores (excluding Xpressmart formats) average 40,000 square feet and provide customers with a broad selection of grocery, health and beauty, and general merchandise items, consisting of more than 25,000 branded and private-label SKUs. Felpausch, it said, has earned a reputation as "the people who care," by providing value to its customers in a small-town, big-service manner, and that it competes successfully "by providing customized store-level merchandising and services tailored to the customer base of each location."

    Among the operational synergies Spartan said it anticipates from the acquisition are first-year gains that will be more than offset by transition expenditures of approximately $5 million to $6 million, inclusive of expenses for marketing and promotional activities associated with merchandising and product and branding initiatives, as well as initial employee training and other costs associated with integrating the acquired operations.

    With warehouse facilities in Grand Rapids and Plymouth, Mich., Spartan serves more than 350 independent grocery stores in Michigan, Indiana, and Ohio, and also owns and operates 68 retail supermarkets and 19 deep-discount food and drug stores in Michigan and Ohio, including Family Fare Supermarkets, Glen's Markets, D&W Fresh Markets, and The Pharm.

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