GREEN BAY, Wis., May 10 /PRNewswire/ -- ShopKo Stores, Inc. and SKO Group Holding Corp. ("SKO"), its parent, announced today that they have entered into a definitive agreement to sell substantially all of the real estate assets of ShopKo Stores, Inc. for approximately $815.3 million to Spirit Finance Corporation. The real estate assets to be sold include approximately 112 ShopKo properties and 66 Pamida properties including the corporate headquarters of both ShopKo and Pamida and three distribution centers. Spirit Finance will acquire the real estate assets by purchasing 100 percent of the outstanding stock of ShopKo Stores, Inc. following the reorganization of the Company operations into ShopKo Stores Operating Co., LLC and Pamida Stores Operating Co., LLC, both wholly owned subsidiaries of SKO Group Holding Corp.

ShopKo and Pamida will continue to manage the existing operations of their store locations under a long-term triple net lease agreement with Spirit Finance. The proceeds from this transaction will be used to retire the existing $700 million real estate debt and to pay down a portion of the companies' revolving credit facility.

In a joint statement, Paul White, ShopKo Stores Operating Co., LLC president and chief merchandising officer, and Larry Johnson, Pamida Stores Operating Co., LLC president and chief executive officer said: "The sale-leaseback transaction strengthens our financial position and allows our management teams to focus on continuing to improve operations, remodeling existing stores, growing our store base, and delivering value to our customers. Accomplishing the sale and leaseback of almost all of our real estate in one transaction with flexible terms also eliminates the significant management resources that normally would be required in executing numerous separate real estate transactions involving many buyers, thereby allowing us to focus on the businesses of ShopKo and Pamida without distraction."

The transaction is expected to close by the end of the second quarter 2006, subject to the satisfaction of customary closing conditions.

"The ShopKo transaction will be our largest undertaking since the inception of Spirit Finance and is a significant milestone in our growth," said Christopher H. Volk, Spirit Finance president and chief executive officer. "ShopKo meets our basic investment policy of having rational asset values, a strong credit history, a sound business plan and an effective strong management team."

Goldman, Sachs & Co. acted as financial advisor to SKO. Citigroup Corporate and Investment Banking acted as financial advisor to Spirit Finance. Morgan Lewis & Bockius LLP and Klehr, Harrison, Harvey, Branzburg & Ellers, LLP acted as legal advisors to SKO. Kutak Rock LLP acted as legal advisor to Spirit Finance.

About ShopKo Operating Co. LLC

With more than $2.2 billion dollars in annual sales, ShopKo Stores Operating Co. LLC is a retailer of quality goods and services headquartered in Green Bay, Wis., with stores located in 13 states throughout the Midwest, Mountain and Pacific Northwest regions. Retail formats include 135 ShopKo stores, providing quality name-brand merchandise, great values, pharmacy and optical services in mid-sized to larger cities and three ShopKo Express Rx stores, a convenient neighborhood drugstore concept. For more information, please visit http://www.shopko.com/ .

About Pamida Operating Co. LLC

Pamida Operating Co. LLC is a general merchandise retailer with 216 Pamida stores, of which 116 contain pharmacies, which bring value and convenience close to home in small, rural communities in 16 Midwest, North Central, and Rocky Mountain states. For more information about Pamida, please visit http://www.pamida.com/ .

About Sun Capital Partners, Inc.

ShopKo and Pamida are affiliates of Sun Capital Partners, Inc., a leading private investment firm focused on leveraged buyouts, equity, debt, and other investments in market-leading companies that can benefit from its in-house operating professionals and experience. Sun Capital affiliates have invested in and managed more than 115 companies worldwide with combined sales in excess of $30.0 billion since Sun Capital's inception in 1995. Sun Capital has offices in Boca Raton, Los Angeles, New York, London, and Shenzhen. For more information on Sun Capital Partners, visit its Web site at http://www.suncappart.com/ .

About Spirit Finance Corporation

Spirit Finance Corporation provides customized, flexible sale-leaseback financing solutions for single-tenant, operationally essential real estate assets that are vital to the operations of retail, service and distribution companies. Spirit Finance's core markets include free-standing automotive dealers, part and service facilities, drugstores, educational facilities, movie theaters, restaurants, supermarkets, and other retail, distribution and service businesses. Additional information about Spirit Finance Corporation is available on Spirit's Web site at http://www.spiritfinance.com/ .

CONTACT: John Vigeland of ShopKo, +1-920-429-4132

Web site: http://www.shopko.com/
http://www.pamida.com/
http://www.suncappart.com/
http://www.spiritfinance.com/