Shareholders Vote to Sell Control of Pantry Pride

Shareholders of Pantry Pride Inc., once a major force in the supermarket industry, Tuesday approved a $60-million deal giving New York-based McAndrews & Forbes Acquisition Corp. control of the company and its subsidiaries.

Grant C. Gentry, who stepped down as Pantry Pride’s chairman and chief executive after six years, said the deal was necessary to keep the Fort Lauderdale-based company going.

“It takes a lot of money to stay in the supermarket business,” he told shareholders at a special meeting Tuesday on the deal.

“We just didn’t have the resources to stay in the supermarket business on a large scale,” said Gentry, who plans to remain as a director and consultant with Pantry Pride.

The deal, which was approved by Pantry Pride’s board of directors on March 22, called for McAndrews to buy up to 600,000 shares of newly issued preferred stock for $100 per share.

After the purchase, McAndrews will hold 37.6% of all outstanding voting shares and a majority of the seats on Pantry Pride’s board. Before Tuesday’s vote, McAndrews owned 20.5% of the common stock.

In addition, the deal provides for Pantry Pride’s top executives, most of whom already have stepped down from their positions, to receive more than $6 million in cash compensation.

Four Pantry Pride board members stepped down Tuesday and were replaced by eight representatives of McAndrews, among them Ronald O. Perelman, newly appointed chief executive. Perelman also serves as chairman and chief executive of McAndrews and its two subsidiaries.

McAndrews officials have not indicated what their plans would be for Pantry Pride, which is a surviving subsidiary of the failed Food Fair supermarket chain.

The lack of a definitive plan was met with criticism from some of Pantry Pride’s shareholders.

“Where do we go from here?” asked Louis Gilbert, who owns 400 shares. “We like being in the grocery business.”

The proxy material that was sent to shareholders suggested that McAndrews was considering “selling some or all of the company’s various business operations.”

Perelman refused comment to reporters, but Gentry said that all of Pantry Pride’s more than 30 grocery stores in southern Florida and the Bahamas were for sale.

Owned 440 Supermarkets

At its peak in 1978, before it filed for protection under Chapter 11 of the U.S. Bankruptcy Code, the 52-year-old Pantry Pride owned 440 supermarkets in seven states on the East Coast and the Bahamas.

Pantry Pride also owns Devon Stores, a chain of 71 retail outlets located near military installations, and Adams Drugs, which operates 423 retail stores in 10 states in the Northeast. Both subsidiaries are included in the McAndrews deal.

McAndrews and its subsidiaries manufacture and sell food flavorings, cigars and other tobacco products and process motion picture film.

Of the 23.23 million shares voting in Tuesday’s special meeting, 94.1% voted for the McAndrews acquisition while 3.9% voted against and 2% abstained.

Also Tuesday, Pantry Pride said its net income for the third quarter ended May 4 was $1.02 million, or 3 cents per share, compared to net income of $3 million, or 10 cents per share, in the year-ago period. Revenue was $230.6 million, up from $188.7 million.

The company said its nine-month earnings were affected in part by $3.4 million in proxy expenses.