As reported at RichmondBizsense, Food World’s Best-Met Publishing and last but most certainly least, the TimesDispatch, Ukrops Supermarkets is officially for sale. From Best-Met:
Now it appears that Richmond’s oldest and most distinguished retail organization, Ukrop’s Super Markets, may be looking to sell its 28 units. Officially, the company wouldn’t address those reports specifically, noting that it doesn’t comment on rumors, but multiple industry sources confirmed to us that a prospectus has been issued detailing vital Ukrop’s store data and seeking interest in a potential sale. Those retailers who have reportedly responded to the prospectus include Supervalu (Ukrop’s principal supplier), Ahold and Harris Teeter (Ruddick Corp.). Several sources believed that Harris Teeter remains the frontrunner and that Supervalu (which currently has many issues on its plate) has dropped out the potential acquisition process.
Readers of our humble site have been aware for several weeks that the sale was in the works. Disclosures in SEC filings for Ukrops Supermarkets’ affililiate First Market Bank, as well as loose lips at Virginia ABC had tipped us off. The question now becomes how much is it worth?
While SaveRichmond has not obtained a copy of the Ukrops prospectus, our general thought is that the grocery operation has little residual value. Information disclosed in the bank’s most recent FDIC filing shows that the supermarket had net profit of only $465,000 in the first quarter of 2009 while crushed with a debt load of about $100 million. Ukrops has so far failed to answer the first challenge in its history from higher end operations like Whole Foods, Trader Joes, Fresh Market and an invigorated Ellwood-Thompson’s. For decades Ukrops had been able to use the political aparatus to withold incentives from competitors and limit their incursion. While this remains the case today in the city, the counties have grown too far too fast to remain captive. And this is where the competition has made the most inroads.
We believe that revenue and net profits going forward will come under increasing pressure from better funded, alchohol-selling, open-on-Sundays rivals. While there may be real estate and other assets of some value, why would anyone pay up for a struggling local grocery chain?
In addition, we believe any supermarket sale could threaten the proposed sale of First Market Bank to Union Bankshares. Many of First Market Banks branches, and a significant amount of its deposits are located in the grocery stores themselves. The financial condition of the bank is deteriorating. Without the Ukrop name and the symbiotic bank/grocery relationship, will the bank’s business remain with Bowling Green-based Union Bankshares?
This could turn into a big, big mess where neither sale goes through.