$1.77B Grocery Mega-Merger: SpartanNash & C&S Unite

Speaker A: 00:00:00

Spartan Ash is merging with CNS Wholesale Grocers.

Speaker A: 00:00:03

According to Progressive Grocer, CNS Wholesale Grocers LLC and Spartan Ash Company have entered into a definitive merger agreement under which CNS will acquire Spartan Ash for a purchase price of $26.90 per share of Spartan Nash common stock in cash, representing total consideration of 1,77 billion including assumed net debt.

Speaker A: 00:00:27

The transaction price represents a 52.5% premium over Spart, Spartan Nash's closing price on June 20.

Speaker A: 00:00:34

What do you think the rationale is behind the Spartan Nash and CNS merger?

Speaker B: 00:00:40

Man?

Speaker B: 00:00:40

I mean, for me, you know, I don't have too much to say on this topic, even though it's a big headline for the week.

Speaker B: 00:00:45

You know, probably the biggest one of the week without a doubt is, I mean it's gotta be scale.

Speaker B: 00:00:48

It's gotta be the rationale.

Speaker B: 00:00:50

There's always strength in numbers.

Speaker B: 00:00:52

The grocery business continues to feel pressure on all sides.

Speaker B: 00:00:55

You have two entities basically with similar value propositions, both being wholesalers.

Speaker B: 00:00:59

And so, you know, there's going to be operational synergies from this.

Speaker B: 00:01:02

This isn't like your TYP merger acquisition where you kind of have to jump through a lot of hoops to find out where the value is.

Speaker B: 00:01:08

So I mean the number, it's telling you the numbers.

Speaker B: 00:01:11

I want to make sure I get this right.

Speaker B: 00:01:12

In the article it said that they've got approximately 10.

Speaker B: 00:01:14

They will service approximately 10,000 retail locations.

Speaker B: 00:01:18

So that's a pretty big operation at this stage in the game.

Speaker B: 00:01:21

And the wholesale game is all about price and the level of service that you can provide.

Speaker B: 00:01:26

So the deal net net should be able to provide CNS and, and Spartan Nash's customers with better prices and hopefully better operational execution over time too.

Speaker B: 00:01:36

So that's, that's my take.

Speaker B: 00:01:37

It's just purely about scale.

Speaker A: 00:01:38

Yeah.

Speaker B: 00:01:38

What do you think though?

Speaker A: 00:01:39

I think that the.

Speaker A: 00:01:40

They've got to be.

Speaker A: 00:01:41

Both Spartan Nash and CNS have got to be facing increasing pressure from the regional and independent grocery stores that they support because those regionals are not able to withstand things like tariffs, things like constantly fluctuating prices.

Speaker A: 00:01:57

The way that some of the larger players in their same markets, the larger competitors like a Walmart or like Albertsons Kroger, they don't have those advantages.

Speaker A: 00:02:06

And so for them to stay competitive, these independent and regional grocers, they're going to need to gain efficiencies and lower costs wherever they can.

Speaker A: 00:02:15

So I think that's really what's probably driving this.

Speaker A: 00:02:20

And I just, I hope that it's as written that that this is really doing just that that's helping bring down prices for those independent grocers and their customers and that this will work as planned.

Speaker B: 00:02:32

Yeah, it's a great point.

Speaker B: 00:02:33

Now, to your I think what you're implicitly saying there, too, is like, does it stave off the continued grab of share by the big guys from the regional grocers?

Speaker B: 00:02:42

Time will tell.

Speaker B: 00:02:42

It's a big question.

Speaker B: 00:02:43

But the other thing about the regional grocers is they don't have the ability to go direct with their own distribution like the big guys do.

Speaker B: 00:02:49

So, you know, they need companies like CNS and Spartan Nash to thrive and survive.

Speaker B: 00:02:54

So, you know, hopefully this makes sense.