Shopko Stores and Pamida plan to merge, which will create a chain drug retailer with nearly 300 pharmacy locations in more than 20 states.

Shopko, Pamida, Shopko Hometown, W. Paul Jones, John Harlow, pharmacy, chain drug retailer, pharmacy services, Sun Capital Parters, Shopko Express Rx, general merchandise retailers

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Shopko Stores to absorb Pamida chain in merger

January 4th, 2012

GREEN BAY, Wis. and OMAHA, Neb. – Shopko Stores and Pamida plan to merge, which will create a chain drug retailer with nearly 300 pharmacy locations in more than 20 states.

The two general merchandise retailers — both owned by affiliates of private equity firm Sun Capital Partners — said Wednesday that they expect the merger to close in mid-February. Financial terms of the deal weren't disclosed.

Plans call for the combined company to use the Shopko name and be based in Green Bay, Wis., where Shopko now has its headquarters. The companies said 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 Shopko's smaller Hometown store concept and brand.

The merged company will led by Shopko chairman and chief executive officer W. Paul Jones, and the retailers said Pamida president and CEO John Harlow will serve on the leadership team and help direct the integration process.

Overall, the combined entity will have nearly 350 locations in 22 states and annual sales of about $3 billion.

"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," Jones said in a statement. "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. We intend to be the leader in this category by combining the best of Shopko and Pamida in our aggressive new store growth plans."

With annual revenue of $2 billion, Shopko operates 149 stores in 13 states throughout the Midwest, Mountain and Pacific Northwest regions. Its formats — all with pharmacies — include 134 Shopko stores, five Shopko Express Rx stores and 10 Shopko Hometown locations. Omaha, Neb.-based Pamida has 193 stores in 17 states, mainly in the Mountain, North Central and Midwest regions, and 132 of the stores have pharmacies.

"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," stated 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."

Shopko said that the Shopko Hometown format, developed over the past three years to augment its larger store model, combines pharmacy services with a broad offering of national-brand and private-label apparel, toys, consumer electronics, seasonal items, and lawn and garden products in stores ranging from 15,000 to 35,000 square feet. In the past couple of years, Shopko has acquired seven stores from Pamida and converted them to the Shopko Hometown format.

The retailers added that when the Pamida chainwide store conversions are done, the combined aims to accelerate the addition of new Shopko Hometown stores in the second half of 2012 and into 2013.

Shopko had previously owned Pamida, acquiring the chain in 1999 and operating it as a separate division. When Shopko was purchased in 2005 by a Sun Capital affiliate, Pamida was separated from the ShopKo umbrella and had its headquarters re-established in Omaha.

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