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WEGMANS MAY GET BUYOUT OFFER, JOURNAL SAYS

Is Wegmans Markets for sale?

A spokesperson for the Rochester-based supermarket denies it is. But an industry publication says at least four of the country's largest food sellers have the privately held, regional supermarket chain on their shopping lists.

The Sept. 18 edition of the trade journal Supermarket News lists super-grocers Kroger, of Ohio, and Safeway, based in California, as prime merger partners.

The industry publication also suggests the possibility of a three-way merger between Wegmans, Virginia-based Ukrop's Supermarkets, and North Carolina's Harris Teeter. The article, which focused on potential mergers in the highly competitive food retailing arena, quoted Jonathan Ziegler, managing director of Deutsche Banc Alex Brown, as saying that Wegmans is just the kind of acquisition the big chains look for to get even bigger.

The addition of Wegmans' stores in upstate New York, New Jersey and Pennsylvania would give Kroger and Safeway "economies of scale, better buying and more negotiating clout with vendors, as well as geographic diversity," according to Ziegler.

The successful Wegman chain would also be a good fit to form a joint venture with Ukrop's and Harris Teeter, due to the company's similarities in terms of corporate culture, Ziegler commented in the publication.

"All three chains go to market in similar ways, so their cultures are similar enough to be easily consolidated," he stated.

According to Ziegler, Kroger, which recently snapped up Fred Meyer to cement its status as the nation's No. 1 grocer, with 2000 sales to exceed $43 billion, wants to be in the Northeast, which is why Wegmans has made its short list, along with New England's Shaw's and Pittsburgh's Giant Eagle.

Ziegler could not be reached Wednesday to provide further details regarding his Wegmans predictions.

For its part, Wegmans remains resolute in its determination to sit out the continuing wave of food industry mergers.

"Any of this kind of speculation is only that -- speculation," said Ann McCarthy, spokeswoman for Wegmans Buffalo division. "It's absolutely not something we're considering. There is no activity of that nature taking place in our company."

Founded as a fruit stand in Rochester in 1916, Wegmans has expanded into a 59-store chain of supermarkets that has received accolades from inside and outside the food retailing world for the way it does business. It's most recent praise came from the September issue of Consumer Reports Magazine, which ranks the regional chain as the No. 2 supermarket company in the country based on everything from customer service to price to produce.

The Rochester retailer has also made Fortune Magazine's list of the "100 Best Companies to Work for in America" the past three years.

The Supermarket News story, which featured merger and acquisition forecasts from Ziegler and other top food industry analysts, also speculated on activity by Tops Markets parent, Ahold USA, the U.S. division of global food giant, Netherlands-based Royal Ahold.

While there was agreement among the analysts that Ahold USA is likely to announce another buy in the next year or so, they differed on where the food company might focus its shopping expedition. While Ahold executives have indicated they will concentrate efforts east of the Mississippi River, where its 1,210 stores are currently located, there was some thought that geographic strategy has been scrapped.

Meredith Adler, a New York-based analyst with Lehman Bros. said geography is still a factor.

"They'd rather find something east of the Mississippi because of their infrastructure," Adler said. "Though this could be the time to take a big step and go west."

If Ahold does head west, it might consider California chains Raley's Supermarkets, Stater Bros. Markets and Save-Mart, or Texas-based Minyard Food Stores or Fiesta Markets. If it stays to the east, Florida's Publix or Giant Eagle might satisfy its hunger to grow.

Ziegler predicted something a bit bigger -- a merger between Safeway and Ahold to create a supermarket superpower of more than 2,800 grocery stores, more than any other U.S. food retailer.

"There'd be some antitrust problems in the Washington, D.C. area, but that wouldn't be enough to quash the deal, which I think has a one-in-four chance of happening."

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