Food Lion owner eyes Bi-Lo

The Midlands' two dominant grocery chains appear headed for a merger.

Food Lion parent Delhaize Group said Monday that it's in talks to buy stores and inventory worth $425 million from Mauldin-based Bi-Lo, which sought bankruptcy protection earlier this year.

Delhaize said it was in nonbinding talks to acquire "a substantial majority" of Bi-Lo's assets, which had revenue of more than $2 billion last year.

Belgium-based Delhaize said it intends to integrate Bi-Lo's shops into its Food Lion chain.

The chains have the largest number of stores in the Midlands.

Food Lion has the most locations, 24, in Richland and Lexington counties. Bi-Lo has the second-largest with 16.

Together, they would have four times the number of area locations compared with current No. 3 grocer, Piggly Wiggly, which has 10 stores in Richland and Lexington counties.

Bi-Lo LLC is a privately held company that operates 214 supermarkets in South Carolina, North Carolina, Georgia and Tennessee and employs around 15,500 people. It filed for Chapter 11 protection in U.S. Bankruptcy Court in March.

Food Lion, based in Salisbury, N.C., has more than 1,300 stores in 11 states with 74,000 employees.

Delhaize said the offer was subject to bankruptcy court approvals and that it hoped to complete a transaction after obtaining a non-appealable sale order from the court.

Bi-Lo chief executive Michael Byars confirmed the company had signed a letter of intent, subject to conditions, with Delhaize. He added that some creditors and lenders have put forward alternative restructuring proposals.

"Bi-Lo remains focused on maximizing the value of the estate for the benefit of all Bi-Lo stakeholders," Byars said in a statement. "All options for Bi-Lo remain under consideration, and we believe it is important to carefully review our options and determine the most appropriate course of action."

The provisional deal was brokered by the two companies themselves. Neither Bi-Lo's primary shareholder, Dallas-based private equity fund Lone Star Funds, nor Bi-Lo's creditors have so far been involved in the negotiations, the Delhaize spokesman said.

Delhaize already generates most of its profit and sales in the United States, where it also operates the Hannaford and Sweet Bay chains. In 2008, Delhaize's revenue from its U.S. stores was $19.2 billion.

The acquisition of Bi-Lo stores will make Delhaize's Food Lion stores more competitive, especially against Wal-Mart, Bank Degroof's analyst Ivan Lathouders told The Wall Street Journal.

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