Fred Meyer Will Purchase Smith's Food For $2 Billion

SALT LAKE CITY - Portland-based Fred Meyer is buying Smith's Food & Drug Centers for $720 million in stock in a deal that will create a Western retailing powerhouse.

Fred Meyer is also assuming $1.3 billion in Smith's debt in the deal, boosting the total value of the transaction to about $2 billion.

The combination will create a grocery and retailing company operating from Alaska to Texas, generating about $7 billion in revenue this year.

Smith's, which is based in Salt Lake City, serves mostly Mountain and Southwestern states while Fred Meyer has stores that sell groceries and general merchandise in the Pacific Northwest and Mountain states. Fred Meyer also owns jewelry and specialty stores.

"This merger of equals will create a merchandising powerhouse across the Western United States," said Robert Miller, chairman and chief executive of Fred Meyer.

The companies expect cost savings, operating efficiencies and refinancing opportunities will save them $65 million a year.

The deal is expected to be completed by the end of the summer, pending approval by shareholders and regulatory clearance.

Under terms of the agreement, approved by the boards of directors of both companies, Smith's shareholders will receive 1.05 shares of Fred Meyer common stock for each share of Smith's common stock.

Based on Fred Meyer's closing stock price Friday, the Smith's stock would be worth $43.97 a share. In late trading today, Smith's

stock was up $3.875 to $43.875; Fred Meyer was up 75 cents at $42.625.

The deal creates a holding company that will be based in Portland for 374 stores and 45,000 employees. But both chains will retain their names and operate independently.

Smith's had 1996 revenue of $2.89 billion, while Fred Meyer reported $3.72 billion.

Ronald Burkle, chief executive of Smith's, will become chairman of Fred Meyer while Miller will be president and chief executive.