Qfc Chain To Purchase Olson's Food Stores -- 12 Markets In King, Snohomish Counties In $39 Million Deal

Quality Food Centers Inc., the largest independent supermarket chain in the Puget Sound region, is about to become even larger by acquiring Olson's Food Stores, a leading locally owned grocery chain with stores in Snohomish and King counties.

QFC will pay $19 million in cash, and stock worth about $19.7 million for 12 Olson's stores, four stores in development and the rights to several other future sites. QFC also will assume $20 million of Olson's long-term debt.

The deal, expected to close in February, does not include Olson's Max Food Stores and some other Olson's operations.

The Olson's stores will be re-named QFC, and employees there are expected to retain their jobs, said Marc Evanger, QFC vice president and chief financial officer.

The move will bolster QFC's share of the local grocery market, now about 20 percent. Safeway and Albertson's are the other major area chains.

To help finance the acquisition, QFC said today it will sell a major stake in the company to a Chicago investment fund by offering to acquire from its own shareholders as many as 7 million QFC common shares at $25 apiece. It will also issue 1 million new shares to the Zell/Chilmark Fund.

Trading in QFC stock was halted by the NASDAQ Friday at $22.25 per share as word spread that a buyout was brewing. The stock was trading today at $23.25 up $1.

Stuart Sloan, QFC chairman and chief executive officer, owns 24 percent of the chain's common stock. He agreed to sell about half his stake to Zell/Chilmark, which will end up owning 27.6 percent of QFC, making it the single-largest shareholder. Sloan will realize about $7.43 million in the deal.

Zell/Chilmark's total investment in QFC stock will amount to

$99.4 million. The investors will hold two seats on a nine-member board.

Olson's founder Morrie Olson also will become a director of QFC.

The offer to shareholders is to begin next month and will be conditioned on at least 3 million shares being tendered. There currently are 19.46 million shares of common stock outstanding.

Zell/Chilmark is an investment partnership with ownership stakes in retail operations, including Revco D.S. Inc., an Ohio-based chain of 1,213 drug stores; and Sealy Corp., a Cleveland-based company described as the largest bedding manufacturer in the nation.

The partnership also controls the Broadway Stores, a Los Angeles-based company of 83 department stores across the Sun Belt.

Based in Bellevue, QFC operates 45 stores and employs 3,200 people. It opened its first store in 1954 and went public in 1987.

Olson's, based in Lynnwood, is a family-owned business founded in 1969. It is the largest independent chain of supermarkets in Snohomish County and also operates in King County.

Morrie Olson described the merger as a strategic move for both companies.

"As the companies have grown, it just became obvious to both of us that we could put together a stronger company," he said, adding that he has no plans to retire.