Thrifty to Buy All 147 Pay ‘n Save Stores for $232 Million in Stock
Thrifty Corp., the drugstore chain segment of Pacific Enterprises, said Friday that it will buy all 147 stores in the Seattle-based Pay ‘n Save Stores chain for about $232 million of Pacific’s stock.
In the deal, Pacific Enterprises will trade 5.2 million shares for ownership of the stores, conceivably increasing Thrifty sales by 40% and moving the sixth-ranked chain to fourth place in drugstore sales in the United States, according to Tom Sanger, a spokesman for Thrifty. Thrifty will acquire the Pay ‘n Save outlets and the Oregon-based Bi-Mart stores, but not the company that owns those operations, Pay ‘n Save Inc., or its debt.
Pay ‘n Save Inc., established in 1947, lost $27 million last year partly because of debt from a 1984 leveraged buyout, when a New York investor group took the operation private. The Seattle firm--owned by two investor groups--then made a public stock offering in 1986, relinquishing 12% of the equity in the sale. However, the stores were profitable in 1987, with sales of $726 million and $4 million in pretax earnings.
The deal will close within 60 days, according to Thrifty executives. They said Thrifty would pass No. 5 Revco and No. 4 Rite Aid and rank fourth behind Walgreen Co., Osco Drug and Eckerd--the top three respectively--when the deal is completed.
Will Become Subsidiary
The acquisition would also give Thrifty, which is concentrated in California, a stronger presence in the Pacific Northwest. Thrifty has 640 stores in nine Western states, but 550 of them are in California. Thrifty has no immediate plans to close any Pay ‘n Save or Bi-Mart stores in Washington, Oregon, Alaska, Hawaii and Northern California and no work force changes are planned, according to Sanger. Thrifty plans to retain the chain’s 7,300 employees and Bi-Mart names, Sanger said.
Pay ‘n Save’s stores will be a Thrifty subsidiary and the operation will be headed by Gerald Nathanson, currently vice chairman of Pay ‘n Save Stores Inc., said Sanger.
“This puts us in a strong marketing position, and we want to take advantage of that,” Sanger said.
“The stores fit well strategically and geographically with Thrifty,” said Pacific Enterprises Chairman Paul Miller. “This will complement Thrifty’s strong market in California.”
Thrifty has 640 stores in California, Washington, Oregon, Arizona, Idaho, Nevada, New Mexico, Utah and Wyoming. It also operates 160 sporting goods stores in eight Western states, principally the Big 5 chain.
Incentive to Improve
The transaction Friday was worth $232 million at Thursday’s closing stock price for Pacific Enterprises, which owns Southern California Gas Co. and companies involved in oil and gas exploration and production. Pacific Enterprises was known as Pacific Lighting Corp. until it adopted its current name in February. The 102-year-old company has been diversifying since the 1960s.
The sale agreement calls for Thrifty to make additional cash payments to Pay ‘n Save.