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DALLAS -- Fleming Cos., a grocery distributor now operating under Chapter 11 bankruptcy protection, said it reached a preliminary agreement to sell its wholesale grocery business to C&S Wholesale Grocers, Inc., a step in what ultimately may be the dismantling of the second-largest grocery distributor in the U.S., Monday's Wall Street Journal reported.
Though the agreement must still be approved by the U.S. Bankruptcy Court in Delaware, Lewisville, Texas-based Fleming said it asked the court to schedule an auction for the business. The company also said that privately held C&S of Brattleboro, Vt. would immediately begin supplying Fleming customers with food. Terms of the agreement weren't released.
An industry observer said the Fleming unit had been hurt by its parent's difficulties. "It appears to be too little, too late," said Burt Flickinger, managing partner in Strategic Resource Group, a food-industry consulting firm. Flickinger estimated Fleming has lost between 35 percent and 50 percent of its grocery wholesale customers since the bankruptcy filing because of poor service levels.
C&S, the country's third-largest food distributor, will face a challenge getting those customers back and keeping other disaffected grocery retailers from leaving, Flickinger said.
The agreement is part of a continuing selloff of the distributor's assets. Earlier this month, Fleming said it was considering the sale of its convenience store distribution unit, which it had acquired in April 2002 for $217 million in cash and $132 million in assumed debt. Fleming said it is in negotiations to sell the unit.
Fleming also this month said it would discontinue operations in July at grocery wholesale divisions in Geneva, Ala.; Lafayette, La.; and Superior, Wis. The company also recently finished unloading its retail grocery unit, which numbered more than 100 discount supermarkets.