Ukrop’s sale speculation getting more solid
October 1, 2009 by Aaron Kremer
The rumors are probably true.
Ukrop’s has been shopping around its chain of grocery stores, according to several sources close to the family who spoke on the condition of anonymity.
But the current recession is lowering the price potential acquirers are willing to pay, and that could put the kibosh on a deal.
Jeff Metzger, who broke the story for the industry publication Food World, said he would guess a potential acquiring price of about $200 million. That’s between five and seven times EBITA (a common way of measuring a company’s earnings) based on Ukrop’s annual revenue of $610 million plus some additional assets such as real estate and an off-site cooking facility, Metzger said.
The prospectus has been circulating since June, he said.
The deal multiple was closer to nine or 10 in the early part of the decade, Metzger said, adding that he has not heard anything official, but he either expects a deal to be announced in coming weeks or for the sale to be called off completely.
The sources, who have known the Ukrops in a personal and business relationship for decades, said that the first suitor at the negotiating table was North Carolina-based Harris Teeter. Negotiations with Harris Teeter — whose closest stores to Richmond are in Charlottesville and soon Williamsburg — broke down when the Harris Teeter refused to buy all the Ukrop’s locations.
“They both drew a line in the sand,” said a source.
“Ukrop’s didn’t want to sell unless they could sell all the stores,” the source said, adding that whether the acquirer would change the name is a matter for debate.
Ukrop’s does not comment on questions about a possible sale.
Several blogs have written that Lowes Foods, a North Carolina grocer, bid on the company, but BizSense was unable to confirm that. Nor could BizSense confirm that the most aggressive suitor was a private equity group, as reported in another trade publication.
However, sources said that most likely president and chief executive Bobby Ukrop would not allow the owner to open on Sunday or sell alcohol if they chose to keep the Ukrop’s name.
Also of note, the closures of two underperforming stores could make the package more appealing. On Sept. 18, Ukrop’s announced it was closing its Roanoke store. At the end of 2008, the grocer announced it was closing a store in an outlying area of Williamsburg. (It still has one closer to the bulk of the population there.)
Both closed stores will be a financial hit for the company because Ukrop’s likely still has to pay rent for the length of the leases, which could be five or 10 years.
Aaron Kremer is the BizSense editor. Please send news tips to Editor@richmondbizsense.com.
The bottom line here is even if there is no sale in the near term because of the economy within 5 years UKrop’s will be sold.Calling off the sale now would mean they would just wait for better times.Frankly I hope the name is changed and the stores changed to fit modern shopping trends.Only time will tell but I believe the family has realized that the grocery business and the aspect of that business for the company has and continues to change in ways that no longer make the company viable and able to support the family and they want out.
What Happened to Our Ukrops?
The Ukrops I know is neat and clean and employees help every chance they get. But this new Ukrops I don’t like. In this last month I have had several experiences that show Ukrops is slipping.I was sick not a short while ago and I really wanted some of my favorite Ukrops Chicken Noodle Soup. My mom had to go to two stores and then call me to see if I would be ok with chicken tortea. She also brought me home some rainbow cookies and they were so stale they felt like rocks. My other experience was much worse. I went to Ukrops for dinner the other day. If the salad bar is supposed to be open to nine o’clock why is half of it gone at 7:30? And when we went to eat almost every table was dirty. When we were done the trash can was so full we couldn’t get our trash in. My sister had a similar experience and the Ukrops person told her that they were out of lettuce and it was only 6:30! The Ukrops employees are not Ukrops employees. Ukrops employees are nice and kind. But these employees are not. They don’t help and are not as nice. I know another company was going to buy Ukrops but we don’t need another company we need the old Ukrops back. This is not the Ukrops I know. What happened to our Ukrops?
Kerry Goldberg
Age 10
St. Edward Epiphany School
I’ve lived all over this land, and Ukrops is without a shadow of a doubt, in class of thier own. I have never – ever – seen ANY supermarket that comes close to the service, the quality, the aura. The highest compliment I can give to ANY business is that I find them to be a “Ukrops” type business. As a matter of fact, I believe American Family Fitness is a “Ukrops” type business, and I believe Puritan Cleaners to be a “Ukrops” business. I feel very lucky to be a Richmonder, albiet, a transplant.