Posh Jurgensen’s Grocery Chain Agrees to Be Sold

Jurgensen’s, a pricey grocery chain where Southern California gourmets and celebrities go for fresh truffles and pate de foie gras, said Monday that it has agreed to be bought by a company making its first venture into food retailing.

Old Dominion Financial Corp., a privately held, year-old firm based in Carson, plans to pay about $3.6 million in cash for the 10-store chain, which has headquarters in Pasadena.

The sale, which is subject to completion of a definitive agreement and the approval of Jurgensen’s shareholders, would remove Harold S. Jurgensen, the company’s 77-year-old founder, from his posts as president and chairman.

Jurgensen, whose family holds more than 200,000 of the chain’s common shares, said he agreed to sell after he became convinced that Old Dominion would carry on the “Jurgensen’s tradition of quality.”

Founder to Serve as Adviser

In a letter to his 125 employees, he said: “After 51 years, I believe it is in the best interests of Jurgensen’s to have new leadership.” If the deal is completed, Jurgensen would continue to serve as an adviser.

“Jurgensen’s has delivered products for over 50 years to the famous people of Southern California,” said Joseph Pressutti, senior vice president of corporate acquisitions for Old Dominion.

“We’re very excited about the quality of its name and the potential expansion in its mail-order and gift catalogue business.” Last year, that business accounted for less than 10% of Jurgensen’s sales.

Old Dominion also said it is considering adding stores but has not decided on specific locations.

Under the agreement in principle, holders of Jurgensen’s 365,476 common shares would receive $8.85 per share, whereas holders of 13,963 preferred shares would get $25 per share, subject to certain adjustments. Jurgensen’s common stock has traded recently in the over-the-counter market at between $6 and $6.50 a share.

Jurgensen opened his first store in 1935 on California Boulevard near Lake Avenue in Pasadena. It featured premium-quality goods and emphasized customer service, especially home delivery. Today, deliveries account for more than half of the company’s sales.

Jurgensen brought to his company a high school education, five years of experience with a meatpacking company and knowledge gleaned from working summer vacations and Saturdays for Model Grocery, a Pasadena chain known for high-quality merchandise and service.

“The Depression was an opportune time to go into business,” Jurgensen said in an interview. “Financing and help from suppliers were available.”

A second store was started in 1941, and the company converted to public ownership in 1946. The chain now has two stores in Pasadena and one each in Beverly Hills, Palm Springs, Santa Barbara, Los Angeles, Rancho Mirage and La Jolla. It also has specialty liquor and gift shops in two of Southern California’s leading men’s clubs.

In its early days, Jurgensen’s catered to such families as the Wrigleys (of chewing-gum fame) and the Busches (of brewery fame) and now counts among its clients Fred Astaire, James Stewart, Charlton Heston and Joan Collins.

For the last three years, the company has reported losses that Paul Neumeyer, vice president and chief financial officer, attributed primarily to costs associated with closing unprofitable stores, steep interest payments and competition from discount liquor retailers. For the fiscal year ended June 30, 1985, Jurgensen’s reported a net loss of $246,224 on sales of $12.3 million.

However, last December’s sale of the company’s warehouse for $2.25 million in cash eliminated most interest expenses, and the company has turned the corner again, Neumeyer said. For the nine months ended March 31, 1986, Jurgensen’s had net income of $790,809 on sales of $9.5 million.

Jurgensen’s competitors in this heady specialty area include Irvine Ranch Farmers Market and Gelson’s, which operate larger stores. Jurgensen’s stores average 7,500 square feet, whereas Gelson’s locations are about 30,000 square feet.

Old Dominion has interests in building materials distribution, specialty contracting and real estate investments, according to Pressutti. The company was founded last year for the purpose of negotiating to buy Boy’s Market, but that chain was sold instead to a group of its senior managers and a Los Angeles merchant banking firm in March. Old Dominion then decided to pursue Jurgensen’s.

Well-heeled shoppers will be keeping a close eye on Jurgensen’s.

“I absolutely rely on them for the good things in life,” said Muriel Ashby, who has been Charlton Heston’s housekeeper for 18 years. “When I want something really special, I go to Jurgensen’s.”

JURGENSEN’S GROCERY AT A GLANCE

9 months ended March 30 1986 1985 Revenues $9,474,000 $9,780,000 Operating income (loss) (89,111) (142,776) Net income (loss) 790,809 (296,621)

Fiscal year ended June 30 1985 1984 1983 Revenues $12,342,000 $12,987,000 $13,450,000 Operating income (loss) (129,000) (334,000) (170,000) Net income (loss) (246,000) (397,000) (172,000)

Assets as of June 30, 1985: $5,111,000