Roundy’s Markets, based in Milwaukee WI, has agreed to pay $36 million in cash to Safeway to purchase 11 Chicago-area Dominick’s locations. These stores will be converted to the Mariano’s banner early in 2014.
Robert A Mariano, chairman and chief executive—who headed the Dominick’s chain before it was sold to Safeway—said Roundy’s was “intentionally selective.” He said the 11 stores are “irreplaceable locations and an excellent strategic fit with the 13 existing Mariano’s stores and with our expansion plans there.”
The stores are anticipated to generate revenues of $850,000 to $950,000 a week. Mariano said rents will average $10 per square foot less than the company is paying for stores it has built in Chicago. Safeway will remain the leaseholder at three of the 11 locations.
The company will proceed with plans to open five new stores during 2014, giving it a total of 29 Mariano’s stores by the end of the year. There is the potential for up to 45 to 50 Mariano’s locations in the greater Chicago market in the next few years, Mariano said.
No direct transfer of Dominick’s employees will occur once the ownership changes, he said.
Although the deal with Safeway will close before the end of the year, Mariano said there will be a transition period of one to two months before Roundy’s takes possession of the stores and reopens them under the Mariano’s banner. He said the company plans to take possession of five Dominick’s stores in late January and to close them for 30 to 45 days to clean and upgrade them. It expects to take possession of the other six stores in early March, with similar plans to close and remodel five of the six over a 30- to 45-day period.
Mariano said the company has the opportunity to expand the sixth store, in the Chicago suburb of Westchester, so it will be closed for expansion and reopened later in 2014. All 11 stores will undergo full remodelings over the next two or three years.
He said Roundy’s plans to refinance its debt and suspend its dividend to provide flexibility to complete the acquisition and integrate and upgrade facilities.