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Bi-Lo and Bruno’s, the southeastern US supermarket chains that have been operating as a single company since shortly after they were acquired from Ahold USA in 2005 for $660 million by private equity group Lone Star Funds, will now be separated and run as different corporate entities.

According to a statement released by Lone Star, “the reorganization is designed to allow both supermarket chains to invest in their future success and align resources to serve the specific needs of Bi-Lo customers and Bruno's customers. A total of 67 Bruno's stores, in Alabama and Florida, are included in this transaction. These stores operate under the Bruno's, Food World and Food Max banners. In addition, 7 unprofitable Food World/Food Max stores will be closed on April 7.”

"This reorganization will allow both supermarket chains to build on their strong brand reputations. Both have strong store management teams, strategic store locations in one of the country's fastest growing regions and both enjoy a long tradition of customer and community service," said Len Allen, President of Lone Star US.

And Brian Hotarek, who took over as the Bi-Lo/Bruno’s CEO less than two months ago when Dean Cohagen retired, said, "Bi-Lo will work with Bruno's to ensure a smooth transition through the reorganization process. We will provide transition support in areas such as IT, accounting and merchandising until other support services are established. Customers at both Bi-Lo and Bruno's should continue to enjoy the same products and customer service because we will remain focused on customers and store performance."

The statement issued by the company said:

“Bi-Lo will concentrate its efforts and financial resources on a group of over 230 supermarkets in core markets across its 4-state market area. In the past year BI-LO has announced capital investments of over $160 million in several of their core trade areas,
including Greenville, Simpsonville, Rock Hill and Myrtle Beach in South Carolina, Chattanooga (TN) and Charlotte (NC). In addition, the company has already invested in its IT infrastructure” and is working “to improve business processes, reduce costs and build a sustainable advantage over competitors.

“Bruno's headquarters will return to Birmingham. Founded by Joe Bruno as a family store 75 years ago, Bruno's Supermarkets serves major markets in Alabama and the panhandle of Florida, such as Birmingham, Montgomery, Mobile and Pensacola. With this announcement, they will have 23 supermarkets under the Bruno's banner, 42 Food World and 2 Food Max stores. The spin off gives Bruno's the opportunity to focus on enhancing its brands and strengthening its connection to the communities it serves.”
KC's View:
We’ve already heard from a number of employees at Bi-Lo/Bruno’s expressing concern that this separation means that what Lone Star really believed was that it would be easier to sell one or both entities if they were not joined at the hip.

This may or may not be a real concern, and it certainly would surprise us if some big company swept in to make an acquisition. However, we do know that Bi-Lo and Bruno’s did not share the same strategic and tactic priorities, and that this separation probably was inevitable.