Shopko, Pamida to merge

COEUR d'ALENE - Two of the nation's leading Midwest-based general merchandise retail chains, Shopko Stores and Pamida, announced Wednesday they will merge to create one of the largest U.S. retailers focused on serving smaller and rural communities.

The combined entity will have nearly 350 locations in 22 states and plans for new store growth in the second half of 2012 and beyond.

Financial details of the merger, expected to close in mid-February, were not disclosed.

"Merging Pamida and Shopko is a great move for our businesses and our customers given our complementary strengths, store networks and consumer-centric retail models," said Shopko President, Chairman and CEO W. Paul Jones.

With annual revenues of $2 billion, Green Bay, Wis.-based Shopko operates 149 stores in 13 states located throughout the Midwest, Mountain and Pacific Northwest regions.

Omaha, Neb.-based Pamida operates 193 stores in 17 states, primarily in the Mountain, North Central and Midwest regions, and has revenues of about $1 billion.

Pamida and Shopko are complementary in terms of locations and communities served, as well as a shared focus on brand-name selection, personalized service, outstanding values every day, pharmacy services and strong community involvement.

"Customers will benefit from their combined resources, buying power and merchandising expertise, which will also set a solid foundation for future growth," according to a press release.

The combined company, which will be headquartered in Green Bay, will use the Shopko name.

Pamida President and CEO John Harlow will serve on the leadership team and help direct the integration process.

There will be no change to Shopko's stores, and about $80 million will be invested over the next 12 months in the conversion of most of Pamida's locations to the Shopko Hometown store concept and brand.

"The Shopko Hometown store format, featuring our unique merchandising strategy and improved store design, is an ideal fit for the smaller communities that Pamida serves with its exceptional service and community-minded approach," he said. "We intend to be the leader in this category by combining the best of Shopko and Pamida in our aggressive new store growth plans."

The Shopko Hometown retail format, developed over the past three years to augment Shopko's larger store model, offers a differentiated and financially successful merchandising strategy.

Shopko Hometown combines pharmacy services with a broad offering of national brands and private label brands of apparel, toys, consumer electronics, seasonal items, and lawn and garden products - all in store formats that range from 15,000 to 35,000 square feet.

Over the past two years, Shopko has purchased seven stores from Pamida and transitioned them to the Shopko Hometown format.

"These locations have delivered an improved customer experience and have seen a significant increase in store traffic, sales and profitability, affirming the potential of the merger," the release said.

Once Pamida's chainwide conversions are complete, the company plans to accelerate the addition of new Shopko Hometown stores in the second half of 2012 and into 2013. Both companies are owned by affiliates of Sun Capital Partners, Inc., a leading private investment firm focused on leverage buyouts, equity, debt, and other investments in market-leading companies.

"This is an exciting move for Pamida, and the Shopko Hometown format will offer our customers an even better retail experience and a new and differentiated product offering that is not currently available in the smaller communities we serve," said Harlow. "Pamida's great associates, store locations, focus on personalized service, and commitment to giving back in our local communities are all ideal complements to Shopko."