Taking Stock

Print Friendly

White Rose Sale Critical To AWI’s Future Success 

New AWI chief executive Matt Saunders steps into the leadership role with his plate full. The veteran wholesale executive, who was brought into the Robesonia, PA co-op by Chris Michael two years ago, knows that selling White Rose is key to the long-term success of AWI, a point also echoed by vice chairman Mike Rothwell, the respected owner of Pennington Quality Market in Pennington, NJ, who noted, “A sale of White Rose will give AWI the opportunity to get back to our co-op roots, with a sharp focus on growing the core business.”

As to who might buy the Carteret, NJ distributor, that’s wide open to speculation, but one thing seems consistent when talking to other industry analysts and observers – selling any wholesale business today, especially one that is unionized and based in the New York metropolitan area, will be a tough task.

“There would seemingly have to be a guarantee that White Rose’s larger customers – Kings/Balducci’s, Fairway and RMG – and the groups that it controls such as Met Foods and Associated would have to be part of any transaction,” said a veteran New Jersey based retailer who currently is not a White Rose customer, but once was. “From a logistics perspective alone, all the major wholesalers in the Northeast – Bozzuto’s, Burris, C&S and Supervalu – can easily service White Rose’s customers based from their current distribution centers and can supply them less expensively and more efficiently. So, securing White Rose’s customers is vital to selling the business.”

Saunders will relocate to Wyomissing, PA and must also deal with a membership that is concerned about the financial stability of AWI itself. Much of that concern stems from the company’s inability to maintain its liquidity level as determined by its banks. As such, earlier this year AWI paid its members only 50 percent of their annual patronage (rebate) for fiscal 2013, which the company stated was $10 million. To account for the other half of that annual payment to the member/owners, AWI issued new Class “B” stock. That new stock can ultimately be converted to Class “A,” but only if approved by AWI’s board as part of the redemption process.

Additionally, a letter from Michael to AWI’s members earlier this year, he stated, “…the Class ‘B’ shares have no maturity and will be redeemed by a majority vote of the board of directors from time to time after a minimum period of one year….the modifications were immediately necessary to maintain our financing facility, minimize our interest expense and provide the necessary liquidity to maximize the annual patronage dividend payment.”

From June 17-19, Saunders and his team led a series of “town hall” meetings in Scranton, Robesonia, York and Pittsburgh to personally inform and update AWI’s members about the current state of affairs and assure them that, with the proposed sale of White Rose, AWI can return to the form of previous years and use the proceeds to build a stronger company.

Saunders also acknowledged that financial advisor, Lazard Middle Management, has prepared a prospectus on White Rose and expects to circulate that “book” by the end of the June to interested parties.

There’s no sugar-coating the fact that it’s been a difficult year for the Robesonia, PA firm as it has tried to deal with challenges at White Rose that in turn have affected AWI’s internal balance.

If it can sell White Rose at a fair price, there’s every reason to believe that AWI’s core $1 billion a year business can remain intact and potentially even grow.

We should know more by the end of the summer.