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    Certified Grocers Inks $100M Deal to Buy Fresh Brands

    SHEBOYGAN, Wis. -- As one of the first M&A deals in what is expected to be an active year for M&A activity in the retail food sector in the coming year, Fresh Brands, Inc. has signed a definitive agreement to be acquired by an affiliate of the Chicago-based grocery wholesale cooperative, Certified Grocers Midwest, Inc. in a transaction valued at approximately $100 million.

    SHEBOYGAN, Wis. -- As one of the first M&A deals in what is expected to be an active year for M&A activity in the retail food sector in the coming year, Fresh Brands, Inc. has signed a definitive agreement to be acquired by an affiliate of the Chicago-based grocery wholesale cooperative, Certified Grocers Midwest, Inc. in a transaction valued at approximately $100 million.

    Under the terms of the agreement, each outstanding share of Fresh Brands' common stock will be converted into the right to receive $7.05 in cash, the company said yesterday. Fresh Brands currently has 4,931,934 shares of common stock outstanding.

    "We are very excited about combining our company with Certified in this transaction, which will greatly benefit all of our shareholders, franchisees, employees and vendors," Louis Stinebaugh, Fresh Brands' president and c.e.o. said in a statement. "We believe that this merger provides an opportunity for us to further lower our product costs, realize operating synergies and efficiencies, and deliver an even more effective value proposition to our franchisees and retail customers, while also providing us with greater financial support and flexibility to grow our business in the future."

    The proposed merger, expected to be completed in the first quarter of 2006, is subject to approval by Fresh Brands' shareholders and other customary closing conditions. Certified obtained a commitment letter for $115 million of financing from a bank syndicate led by J.P. Morgan Chase to provide, subject to customary conditions, all necessary debt financing to fund the transaction and to provide funds for the ongoing operation of the businesses.

    Ken Koester, Certified's president and c.e.o., said the acquisition "provides many opportunities to strengthen both organizations. Certified is looking forward to working with the associates of Fresh Brands because both organizations are dedicated to providing independent supermarket operators with excellent service at a low cost. We are owned by successful independent supermarket operators and believe that the enhanced buying power and other benefits of the merger will provide great value and opportunities to the Fresh Brands franchisees as well as the independent supermarket operators that we serve."

    In a conference call following yesterday's announcement, Stinebaugh said the deal will provide Fresh Brands with substantial liquidity for all of its anticipated working capital needs. "In the near term, we have plenty of liquidity, with $17.9 million of availability under our current bank line of credit," at the end of the third quarter.

    Pointing to combined post-merger volume, Stinebaugh said Fresh Brands "will become an even better and more efficient partner with our vendors. By working together to take unnecessary costs out of the system...we will ultimately sell more product for our vendors and [obtain] more competitive pricing for our customers."

    "For the entire organization and all of our constituencies, this merger succeeds in eliminating the significant public company costs and distractions that have unnecessarily burdened" Fresh Brands, Stinebaugh continued, noting that the merger also provides "more financial capabilities and flexibility to invest and grow in our company. We feel very good about our future with Certified and the value-added synergies which will result."

    The transaction is also important for Certified, said Stinebaugh, "by helping it grow its core wholesale business in a contiguous market and enhance cost savings opportunities and other synergies which it can then pass onto its own cooperative members. With ongoing consolidation occurring in our industry, this merger is very good strategy for both parties."

    Fresh Brands, Inc., which operates corporate-owned and franchised retail supermarkets under the Piggly Wiggly and Dick's Supermarkets brands, currently has 74 franchised supermarkets, 20 corporate-owned supermarkets and two corporate-owned convenience stores, all of which are served by two distribution centers and a centralized bakery/deli production facility. Supermarkets are located through Wisconsin, northern Illinois and Iowa.

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