Stater Bros. to Convert to Public Firm : Plans Initial Offering to Raise About $45 Million

Stater Bros., a company that was started in Yucaipa, Calif., in 1936 by twin brothers Cleo and Leo Stater and now operates 94 supermarkets in Southern California, said Monday that it intends to make an initial public offering of common stock and notes.

The plan to convert the company to public ownership marks the fulfillment--ahead of schedule--of a goal set two years ago by a group of private investors, which bought the grocery store chain from Petrolane Inc.

Jack H. Brown, Stater Bros. president and chief executive, said Monday that, when the group purchased the company, it expected to have a public offering in perhaps four years. But the “progress of the company has been so solid that we moved our timetable up,” he said.

1 Million Shares of Stock

The company expects to raise between $42.5 million and $45 million in the offering. According to filings with the Securities and Exchange Commission, the offering will consist of 1 million shares of common stock, which will constitute one-fourth of the Colton, Calif.-based company’s stock, and $30 million of 10-year subordinated notes.

Brown said the company’s seven investors will not be selling any of their company holdings in the initial offering.

Stater Bros. had a brief period of public ownership from 1966 to 1968, when it was bought by Petrolane, a Long Beach-based petroleum services company that retained about $25 million in preferred stock. In 1983, Brown and other executives of Stater Bros. Markets, the wholly owned subsidiary that operates the grocery stores, acquired the company in a leveraged buy-out. (In a leveraged buy-out, company assets are used as collateral to help finance the acquisition.)

The proceeds of the public offering, Brown said, will go to reduce the debt incurred in the buy-out and provide additional funds “for a more rapid expansion than what we internally were able to generate as a private company.” He added that the company intends to open new stores and remodel some existing ones.

The company, which has 64 stores in the Inland Empire counties of Riverside and San Bernardino, had 1982 sales of $575.6 million. Brown would not dispute industry estimates that the company would have revenues for the year ending Sept. 30 of $800 million.

Brown added that continued growth in the Inland Empire is expected to result in increased competition for Stater Bros., which has an estimated 38% to 40% share of that market. The company also has 16 stores in Orange County, 13 in Los Angeles County and one in Kern County.

In the offering, the shares will be sold for between $12.50 and $14.50 each, Brown said. Kidder, Peabody & Co. will be the lead underwriter and Merrill Lynch Capital Markets will be the lead manager of the notes offering.