Food Lion wants to take a big bite out of the Chattanooga area grocery market.
Delhaize Group, the Belgian owner of Food Lion, has agreed to buy "a substantial majority" of Bi-Lo's assets for $425 million, officials said Monday.
Delhaize announced it has entered into a nonbinding letter-of-intent with the Mauldin, S.C.-based Bi-Lo as part of Bi-Lo's Chapter 11 bankruptcy proceedings.
Area Bi-Lo stores would be integrated into Food Lion's network if a federal judge approves the deal, according to Delhaize.
Bi-Lo had been exploring its restructuring options for some time, and the company's deadline to submit a plan for re-organization was Friday, said Lorrie Griffith, editor of the Shelby Report, a grocery industry publication.
"Whether it was a sale, selling part of the company or whatever it was, they have just been looking at all of their options," she said. "This was apparently the best deal that they were presented with."
Ms. Griffith said it is unclear if area Bi-Lo stores will begin operating under the Food Lion name or perhaps Bottom Dollar or Bloom -- other banners operated by Food Lion.
* Stores - 1,300; 10 in Chattanooga area
* Locations - 11 Southeast and Mid-Atlantic states
* Workers - 74,000
* Owner - Delhaize Group
* Stores - 214; 29 in Chattanooga area
* Locations - 4 Southeast states
* Workers - 15,500
* Owner - Lone Star Funds
Christy Phillips-Brown, a Food Lion spokeswoman, said both companies remain in discussions. She declined to comment on whether the deal includes all of Bi-Lo's 214 stores.
Rick Anicetti, executive vice president of Delhaize Group and president and chief executive of Food Lion, said it has great admiration for the associates and stores at Bi-Lo.
"We believe our markets and service philosophy are complementary, and we look forward to continuing our discussions with Bi-Lo," he said.
According to Reuters, the assets of Bi-Lo will be open to other bids in an auction and another buyer could top Delhaize's proposed price.
Michael Byars, Bi-Lo president and chief executive, said Bi-Lo will continue its attempt to maximize the value of its business and to return the highest and best recoveries to our creditors and constituencies.
"Consistent with its fiduciary duty, Bi-Lo remains focused on maximizing the value of the estate for the benefit of all Bi-Lo stake-holders," Mr. Byars said. "All options for Bi-Lo remain under consideration, and we believe it is important to carefully review our options and determine the most appropriate course of action in the context of the Chapter 11 process."
He said the company "intends to work constructively with all parties in order to effectuate a successful restructuring."
While a federal Bankruptcy Court judge first must approve the agreement, Delhaize officials said they intend to close on the deal with Bi-Lo shortly after getting a nonappealable sales order from the court.
Bi-Lo owner Lone Star Funds, a Dallas-based private equity firm that bought the grocer in 2004, filed voluntary petitions for bankruptcy relief on March 23. It said then that tight credit markets prevented it from refinancing a loan that was coming due.
Bi-Lo traces its Chattanooga area roots to Red Food Stores, which long operated in the area.