Bahamas News

Winn-Dixie yesterday confirmed Tribune Business revelation that Mark Finlayson and Jerome Fitzgerald were leading a group to buy its majority 78 per cent stake in Bahamas Supermarkets, paying $50 million in a deal likely to flush out other bidders.

The agreement reached with Mr Finlayson and Mr Fitzgeralds BK Foods is not a done deal, though as it provides an opportunity for higher and better offers to be submitted to Winn-Dixie for Bahamas Supermarkets.

This would kick-start an auction process for Bahamas Supermarkets, which operates 12 stores in New Providence and Grand Bahama under the City Markets and Winn-Dixie labels. Any auction process is likely to last for 45 days due to the fact that Winn-Dixie is in Chapter 11 bankruptcy protection in the US.

Several sources suggested that other bids were likely to be made soon, with at least one other group said yesterday to be willing to match or exceed BK Foods $50 million offer. BK Foods will have the opportunity to increase or enhance its offer, though.

The Tribune has learnt that also involved with BK Foods is Philip Kemp, a former Royal Bank of Canada banker and ex-chief financial officer of Burns House, where he worked with MR Finlayson, Tony Ferguson of Colina Financial Advisors, is acting as financial adviser to the group.

Meanwhile, High Sands, former Bank of the Bahamas International chairman, yesterday vehemently denied claims by a tabloid that he was involved with the BK Foods bid.

There is absolutely no truth in the statement that I have now or have ever expressed any interest in purchasing Winn-Dixie’s shares in Bahamas Supermarkets or any involvement with a group that may be interested, Mr Sands said. I am shocked and disappointed that such a thing could run.

Mr Sands, sits on various corporate boards, including Bahamas Supermarkets. He added that it would be highly unethical for any director to be involved in a majority share buy-out of a company at whose pleasure he served.

All 12 Bahamas Supermarkets stores are expected to remain open once the purchase is complete, and Mr Fitzgerald said yesterday in a statement that the current management team would remain in place, with staff unaffected.

The company is currently led by managing director, Ken Burns, and chief financial officer Bryan Knowles. Hone of BK Foods directors appear to have any direct experience in grocery retailing, although some have been involved in other area of retail, notably Mr Finlayson with Solomon’s Mines.

Mr Fitzgerald, a BK Foods director, said: Bahamas Supermarkets has had a long history of success and profitability, and our group fully expects that success to continue with the same management team overseeing day-to-day operations at the company and the same associates in the stores. We believe this is a good opportunity that puts the retail food business in the Bahamas completely in the hands of Bahamians.

If the BK Foods deal is completed, Bahamas Supermarkets will remain publicly traded and listed on the Over-the-Counter market, with 22 per cent of is ordinary shares remaining in public hands.

BK Foods has to purchase the 78 per cent stake from W-D (Bahamas), Winn-Dixie’s wholly-owned Bahamian subsidiary.

Part of the purchase includes a transition services agreement to ensure that management knowledge and now-how is transferred to BK Foods, plus a non-compete agreement that lasts for two years.

BK Foods will not be able to use the Winn-Dixie trade name or trademark on it stores, which will be removed within six months of the deal being completed.

But as revealed by The Tribuneyesterday, the sale of BK Foods will still require the approval of the US Bankruptcy Court in the Middle District of Florida, given that Winn-Dixie is under Chapter 11 bankruptcy protection. Bahamas Supermarkets was not included in the bankruptcy filing.

The Tribune revealed last September how Winn-Dixie had effectively placed Bahamas Supermarkets into play,meaning that it would accept offers for its majority shareholding if the price was right.

Although the company denied it at the time, one source close to an interested party said: I can confirm there is interest in Bahamas Supermarkets.

Bahamas Supermarkets leases all 12 stores it operates from, meaning that it does not own real estate. Therefore, BK Foods is buying an operating business, its fixtures, furniture and inventory.

A significant percentage of Bahamas Supermarkets products are Winn-Dixie own brands, and it is unclear whether these would continue to be supplied in the event of a deal going through. There are enough food wholesalers in existence, though, to ensure there will be no supply chain disruption.

Peter Lynch, Winn-Dixie’s president and chief executive, said yesterday: We have concluded that a sale of our Bahamian operation is in the company’s best interest as we continue to sharpen our focus on successfully implementing our business plan and preparing to emerge from Chapter 11.

Although the 12 stores in the Bahamas are profitable,they are not a core business for us. The additional liquidity generated from this sale will help Winn-Dixie support the remodeling of existing stores and development of new stores in our case US markets. We are pleased that a local Bahamian company recognizes the value of the Bahamian stores and the associates working in them.

Bahamas Supermarkets generated a 14.8 per cent rise in net income to $3.1 million for the 2006 second quarter, with gross sales up 6.7 per cent during the 16 weeks to January 22, 2006, at $44.1 million.

Sales for the first six months were up by 8.5 per cent at $75 million, with net income up from $3.6 million to $4.7 million.

Mr Fitzgerald and Mr Finlayson had also formed a group, know as BK Water, to compete for the Arawak Cay reverse osmosis plant contract. Mr Ferguson was their financial advisor on that bid too.

It therefore seems that Mr Finlayson ad Mr Fitzgerald have formed a Bahamian investment group eager for acquisitions of both existing businesses and new ventures such as government contracts.

By Neil Hartnell
Tribune Business Editor