Distributor Food For Health Acquired by C-Store Distributor AMCON

PHOENIX, AZ—Long-time natural products distributor Food For Health, based here, has been acquired for an undisclosed cash amount by AMCON Distribu-ting (DIST), a convenience-store distributor based in Omaha, NE. Food For Health was sold by majority shareholder Prudential Equity Investors. Peter Slusser and Associates of New York served as the investment banker in the transaction.

Until the sale one of the few remaining independents, Food For Health reported sales of $36.4 million in its most recent fiscal year ended May 31, 1997. According to Jerry Fleming, CEO of Food For Health, the company will operate as a separate wholly owned subsidiary and seek to expand its operations in the Western U.S.

The acquisition of Food For Health by AMCON is expected to be accretive to earnings in 1998, says AMCON Chairman William Wright.

AMCON, founded in 1980, distributes groceries, candies, snacks, beer, soft drinks, cigarettes and other consumer products to convenience stores and service stations in the Great Plains and Rocky Mountain regions. Publicly traded on the Nasdaq exchange (DIST), AMCON posted revenues of $128.8 million and income from operations of $1.9 million for the nine months ended June 30, 1997. Its stock is thinly traded with large insider positions, Wright acknowledges. However, he says, the company hopes to expand trading activity by exploring options that may include a secondary offering, with insider shares or new issues. Currently, the company has 2.45 million shares outstanding and a market capitalization of $6.7 million.

The acquisition gives AMCON a crossover into the natural products market that contributes 18% to its overall projected sales of $200 million, and Wright would like to see that figure grow dramatically. “Natural foods is a broad segment within the food industry, with an excellent growth rate, and is clearly here to stay,” Wright says. “We were impressed with the leadership at Food For Health and are prepared to invest in both internal growth and future acquisitions within the category.”

Food For Health was established in 1972 and specializes in serving the independent retailer, says Fleming, an industry veteran. “There is opportunity in working with AMCON. We entertained other acquisitions that might have minimized alternatives in the marketplace. However, we feel there is a need for competition to serve the market,” he says.

Says one industry source in distribution: “As a small player, Food For Health needs to have either a prime geographic base to operate out of, or it needs to have a distinct and unique product selection or niche. Also, it may be difficult for an outsider to come in and be successful in distribution in this industry.”

Yet, the market is growing more lucrative in Food For Health’s own back yard. While the company promotes its NutriValue program among independents, it also hopes to profit from the addition of at least four new stores in the Phoenix area by national retailers Whole Foods Market (one store and one planned) and Wild Oats (three stores, one planned), as well as increased activity among local chains Hi-Health and Arizona Health Foods.