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The Penn Traffic Company Announces The Sale Of Its Sani-Dairy Operation.

SYRACUSE, NY--(BUSINESS WIRE)--December 23, 1997--The Penn Traffic Company announced today that it has entered into a definitive agreement to sell its Sani-Dairy division to Dean Foods Company for $37.5 million in cash. Sani-Dairy, based in Johnstown, Pennsylvania, primarily supplies Penn Traffic supermarkets with fluid milk, private label ice cream and related dairy products. Sani-Dairy is expected to have revenues of approximately $65 million (primarily intercompany sales) for the fiscal year ending January 31, 1998.

Penn Traffic expects to record a gain of approximately $25 million (pre-tax) upon the completion of the transaction. The Company expects that the divestiture of the Sani-Dairy division will be accretive to the Company's future earnings.

Concurrent with the completion of the transaction, Penn Traffic will enter into a 10-year supply agreement with Franklin Park, Illinois-based Dean Foods for purchase of products currently supplied by Sani-Dairy and two other dairies to the Company. These products will be supplied at costs no less favorable than those currently charged to Penn Traffic's retail supermarket operations.

"The sale of our dairy manufacturing division and the new marketing alliance with Dean Foods is a positive step for our company," said Gary D. Hirsch, Chairman of the Board of The Penn Traffic Company. "Dean Foods is a recognized leader in the dairy industry with incomparable expertise in marketing and manufacturing. Our company will benefit from Dean's active participation in the development of growth plans for our retail dairy and ice cream sales. Additionally, the sale of our dairy will improve our financial position."

Dean Foods has agreed to offer employment to all current Sani-Dairy employees. "It is always difficult to part with a business and the employees who helped make it successful," said Phillip E. Hawkins, Penn Traffic's President and Chief Executive Officer. "However, in this case, the Sani-Dairy operation should benefit by being part of one of the premier companies in the grocery manufacturing industry. "

The completion of the transaction is subject to certain conditions, including regulatory approvals. Proceeds from the sale will be used to reduce indebtedness and for general corporate purposes. -0-

The Penn Traffic Company operates 263 supermarkets in Pennsylvania, upstate New York, Ohio and West Virginia under the "Big Bear," "Big Bear Plus," "Bi-Lo Foods," "P&C Foods," "Quality Markets" trade names. Penn Traffic also operates wholesale food distribution businesses serving 108 licensed franchises and 92 independent operators.

CONTACT: Gary D. Hirsch

Chairman of the Board



Martin A. Fox

Vice Chairman - Finance

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Publication:Business Wire
Date:Dec 23, 1997
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