American Breco Group to Buy Boys Markets : Management, Mexican Family to Pay $131 Million

The 54-store Boys Markets chain said Friday that it has agreed to be sold for $131 million to a group led by American Breco Corp., a Los Angeles company controlled by a wealthy family from Mexico.

Boys President Peter J. Sodini said he foresees no major management or strategy changes. The current management, he noted, will also end up owning a “significant” share of the company.

The agreement comes at a time of corporate change in the Southern California grocery business. Ralphs supermarket chain is being sold by its parent company, Federated Department Stores, which has agreed to merge with R. H. Macy & Co. In December, Vons Cos. said it had agreed to buy Safeway supermarkets in Southern California.

With local supermarkets fetching premium prices, analysts viewed the agreement to buy Highland Park-based Boys as a smart move for American Breco. The company is headed by Alfredo Brener, whose family is reportedly one of the richest in Mexico and is said to control firms that own the Camino Real hotel chain--one of Mexico’s largest.

“There is no question that they have made a good investment,” said Tom Pirko, president of Bevmark, a Los Angeles consulting firm. “Boys is a company that can be sold again for a major profit.”

The Breners had previously shown interest in the U.S. supermarket industry. About two years ago, the family attempted, but failed, to go into business with Houston-based Fiesta supermarkets, which cater primarily to Latino customers.

None of the Brener family members were available for comment.

Another beneficiary of the sale would be Riordan Freeman & Spogli, a Los Angeles merchant banking firm that, along with Boys management, purchased the chain in April, 1986, for $83 million. The group retained a share in Boys after the chain sold stock to the public in May, 1987.

Serves Minority Communities

Analysts say cash from the sale would help Riordan Freeman support Ralphs Chairman Byron Allumbaugh, who is making a bid for the supermarket chain. Also, analysts note, Riordan Freeman’s Bayless grocery chain in Arizona has filed for protection from creditors under federal bankruptcy laws, and the stock of its P&C; markets in Upstate New York has risen sharply.

“What we might be seeing is that the Riordan group might be liquidating their positions in supermarket chains across the country” to raise money for a Ralphs buyout, said John B. Kosecoff, a retail analyst at First Manhattan.

Founded in 1924, Boys has focused its attention on serving Los Angeles’ fast-growing minority communities. The chain has 54 supermarkets and one drug store in the Los Angeles area. Recently, the company bought eight Food Co. Markets for $16 million.

Boys has been applauded for opening stores in minority neighborhoods while other big chains have pulled out. However, the chain has been criticized for charging high prices.

Last July, the California Public Interest Research Group, a consumer organization, found that Boys had the highest overall prices in a survey of eight major chains.

Popular Takeover Candidates

The finding apparently hurt business. “They (Boys) were running into a real sales slowdown,” said Ron Rotter, a retail analyst at Morgan, Olmstead, Kennedy & Gardner, a Los Angeles brokerage firm. “They were going to take a short-term hit to profits for a campaign” to boost sales, Rotter said.

“Clearly the survey did not help sales at the time,” said Sodini. As a result, “We lowered a significant number of prices and engaged in more promotional activity than we would normally have,” he said.

Despite its recent problems, medium-sized chains like Boys and Hughes supermarkets have been popular takeover candidates, said Pirko. Since most prime supermarket sites are occupied and construction costs high, Pirko said. “You can’t really grow by opening more stores--you need to buy existing businesses.”

Under the agreement, the American Breco group will pay $12.50 for each of Boys’ 10.46 million shares. Bankers Trust has agreed to lend American Breco $97 million to finance the acquisition. “I think the buyout essentially substitutes one set of investors in place of another,” Sodini said. The new owners “will be involved in the long-term strategic management of the company. The day-to-day management will be in the same hands.”