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WILSON FARMS' NEW OWNERS PLAN TO UPGRADE STORES, ADD OUTLETS

The new leaders of Wilson Farms Neighborhood Food Stores say they plan to upgrade stores and expand the chain's number of locations, following a buyout that reconnects Wilson Farms with its roots.

Several former Tops Markets executives will hold top management positions in the Wilson Farms chain, under an acquisition announced Thursday. The investors include members of the Nanula family, one of the founding families of Tops Markets, which launched the Wilson Farms convenience store chain in 1969.

The investment group, known as WFI Acquisition, was created by Nanco Enterprises, which includes Nanula family members, and a New York City-based private equity firm, Bruckmann, Rosser, Sherrill & Co., which has $1.2 billion under management.

The sale price was not disclosed. The buyout covers 122 Wilson Farms stores, 66 Sugar Creek stores, and 10 free-standing Tops Xpress locations that are not on Tops supermarket properties. The deal is expected to close in the second quarter.

WFI plans to keep all 2,400 employees of the convenience store operations, said Paul Nanula, president and chief executive officer. It will move Wilson Farms' administrative operations to 1780 Wehrle Drive in Amherst.

Nanula declined to reveal specifics about the new owners' expansion plans. But he said WFI would "infuse capital back into the business," and is looking at ways to upgrade its existing locations.

Ahold confirmed in early 2004 that it wanted to sell Wilson Farms, to focus on its supermarket operations. Ahold continues to own the Tops Markets chain.

Stefanie Zakowicz, a Tops spokeswoman, said three "serious" bidders emerged during the process. "But it ebbed and flowed," she said.

Ahold did not take a "fire sale" approach to divesting the convenience stores, she said. "They waited until the right buyer came along and everything fell into place."

WFI's leaders say they bring to their new roles familiarity with food retailing, the Wilson Farms chain, and the customer base.

Savino Nanula, Paul's father and a co-founder of the Tops chain, will serve as WFI's chairman. In 1960, he joined with Armand Castellani and Thomas Buscaglia to create Tops, and later served as chairman and CEO of Tops.

"I've come full circle," said Savino Nanula, who left Tops several years ago. "It's almost like beginning all over again."

Paul Nanula worked for Tops from 1976 to 1998, spending his last several years at the chain as a district manager.

Dan Shanahan, WFI's vice president and chief financial officer, held a number of positions with Tops and Ahold in the United States and Asia, and once ran the Wilson Farms and Sugar Creek chain for Ahold.

Wilson Farms has stores in Western New York, along with the Rochester and Syracuse markets. Tops acquired Sugar Creek in May 2000, and introduced the Tops Xpress format in 2001.

Only some Tops Xpress locations are part of the buyout, and they will be renamed Wilson Farms Xpress once the deal closes, WFI officials said. WFI is also exploring changing the name of all of its convenience stores to the Wilson Farms banner.

According to rankings compiled by Convenience Store News, the chain acquired by WFI is one of the 40 largest in the nation, based on its number of locations.

Paul Nanula said Wilson Farms doesn't fit the typical convenience store profile, since it has a wider array of products. WFI said it will focus on the stores' perishables and "food service" items, including sandwiches and coffee.

The National Association of Convenience Stores estimates that 75 percent of a convenience store's revenues come from sales of gasoline and tobacco. Only 94 of the 198 stores to be acquired by WFI sell fuel.

But convenience stores are also making a push toward sales of fresh food, said Jeff Lenard, an NACS spokesman. "People expect fresh food offers from a variety of channels, including convenience stores," he said.

In that sense, he said, Wilson Farms has a "head start" on other companies in the industry.

The profit margins on food-service items are also higher than those on gasoline, making them important products to a convenience store, Lenard said.

The ex-Tops executives say WFI is strengthened by the involvement of Bruckmann Rosser.

"We found a partner that believes in our vision," Shanahan said. Bruckmann Rosser officials could not be reached to comment on the deal.

Burt Flickinger III, a supermarket industry consultant, said Wilson Farms should benefit from the leadership of people such as the Nanulas and Shanahan, but he said he hopes Bruckmann Rosser gives that team lots of decision-making authority.

While he said Bruckmann Rosser has enjoyed success with a number of investments in areas such as manufacturing and health care companies, he noted that Bruckmann Rosser struggled with its investment in another supermarket chain, Jitney Jungle Stores of America, after acquiring it in 1996. Mississippi-based Jitney Jungle ended up filing for Chapter 11 bankruptcy protection, and later sold or closed its stores.

"The retail results were deeply disappointing for all their investors," Flickinger said.

But Flickinger said he has confidence in the local leaders WFI has assembled to oversee Wilson Farms.

"It's critical that (Bruckmann Rosser) let the Nanulas and (Shanahan) run the business independently, without outside interference," Flickinger said.

Bruckmann Rosser's portfolio includes Au Bon Pain, a bakery cafe chain, and B&G Foods, which makes, sells and distributes a variety of food products.

Flickinger said the sale of the convenience stores also benefits Ahold and Tops, and should open the door to additional investment in Tops supermarkets.

WFI's top leadership includes two other former Tops officials.

Lou Terragnoli, WFI's vice president of construction, capital spending and real estate, was formerly vice president of engineering and construction for Tops.

And Nick Gallegos, WFI's vice president of sales and marketing, spent nine years with Tops as its vice president of nonperishables merchandising and procurement.

e-mail: mglynn@buffnews.com

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