to merge, forming what could well become the Island's largest food wholesaler.

The merger will take effect January 31, 1993. Bosses of both companies, which together employ as many as 120 people, said there would be no employee lay-offs, at least for the next two years.

Yesterday's announcement ends weeks of rumours that a deal was in the offing between the two wholesalers. Though there was some speculation that Butterfield would buy out Vallis, it was made clear yesterday that the owners of Vallis & Co. would retain "significant ownership'' in the new larger company, Butterfield & Vallis Ltd.

In a joint press conference, it was announced that Butterfield vice president Mr. Jim Butterfield will become president and chief executive officer, while Butterfield president Mr. George Butterfield will become chairman. Vallis president Mr. Francis Vallis will become vice chairman of the new company.

The merger better positions the companies to compete more effectively with other wholesalers not only in Bermuda but in the US as well.

Mr. Butterfield said local wholesalers are now having to compete with companies in New Jersey "which can put a container of food together and ship it here in a few days''.

Mr. Ward Young, president of rival wholesalers Bermuda General Agency Group of Companies, said the merger will make competition between the various wholesale companies much more "acute''.

Mr. Young, whose company bought out Purvis Distributors earlier this year and Weldon Ltd. in 1990, said the Butterfield-Vallis move will help to make the entire industry more efficient, and much more price and cost-conscious.

The BGA Group of Companies now employs approximately 130 people, but Mr. Young has already announced that the base of staff will be cut by about 20 people.

Owners of Butterfield & Co. and Vallis & Co. have signed a letter of intent to merge. While neither company would discuss their financial positions, Mr.

Butterfield did say that a merger would be in both companies' interest because of the troubled state of the economy.

Mr. Vallis said a new facility, to accommodate an estimated 6,000 products, will be built at the present headquarters of Butterfield & Company, on Orange Valley Road in Devonshire.

He said the new larger facility, which will have a "higher degree of sophistication'', will help the company provide better service, especially in the area of distribution throughout the Island.

For now both companies will continue to operate from their present locations, but in January next year, Vallis & Co. will move out of its present offices on Woodlands Road in Pembroke to Butterfield's Devonshire plant.

With the expertise of both companies, which have been in the wholesale business for a combined total of 155 years, Mr. Butterfield said Butterfield & Vallis Ltd. would become "the biggest and best food distribution'' business in Bermuda.

He said both companies were very excited about the move as are their North American suppliers.

The biggest concern came from the companies' employees who were worried about the future of their jobs, Mr. Butterfield said. But at a staff meeting of both companies held on Wednesday, employees were told that no lay-offs were planned in the immediate future.

He added, though, that the number of employees may be reduced through attrition, for example, if an employee retires, he may not necessarily be replaced.

In a press release yesterday the companies said jointly: "The owners of Butterfield & Vallis Ltd. believe that the merger will benefit all parties, including employees, customers, and principals, and would like to thank everyone involved for their past and future support.'' PHOTO JOINING FORCES -- Butterfield & Co. vice president Mr. Jim Butterfield (left) and J.S. Vallis president Mr. Francis Vallis at yesterday's press conference at which it was announced the two wholesalers will merge on January 31, 1993.