Food Lion Plans to Merge With Hannaford

Regional supermarket chains Food Lion Inc. and Hannaford Bros. Co. unveiled plans to merge in a $3.6-billion deal that would create the sixth-largest company in the rapidly consolidating food retailing industry.

Food Lion, which is majority-owned by Belgian retailer Delhaize, also said it would form a holding company and take other steps to prepare for future acquisitions to expand nationally.

In the deal, Salisbury, N.C.-based Food Lion would pay $79 a share in cash and stock and assume about $300 million in debt to acquire Hannaford, which operates 152 Hannaford and Shop ‘n Save stores in New England, New York and the Southeast.

The offer was the best of four bids for the 116-year-old company, said Hugh G. Farrington, Hannaford’s chief executive.

Safeway Inc. and Kroger Co. were among the companies that had shown strong interest in Hannaford, which was shopped in an auction by Morgan Stanley, Dean Witter & Co.

Food Lion operates 1,258 Food Lion, Kash ‘n Karry and Save ‘n Pack stores in the mid-Atlantic and Southeast, and the combined company, with about 1,400 stores from Maine to Florida, would have pro forma annual revenue of about $13.5 billion.

In a blueprint for future acquisitions, Food Lion will run Scarborough, Maine-based Hannaford as a wholly owned subsidiary, maintaining the market strength of the Hannaford stores, while integrating operations of the companies’ chains.

Food Lion said it will also authorize a 1-for-3 reverse stock split and add up to four seats on its board as it prepares for further acquisitions.

Food Lion Class A shares closed at $8.47 a share, down $2.53 on Nasdaq, while Hannaford shares closed at $72.75, up $9.06 a share on the New York Stock Exchange.