Safe for now: Local Safeway, Albertsons safe after sale
Grand Junction supports several grocery stores, including two operated by Albertsons and three operated by Safeway.
A merger of the grocery chains worth more than $9 billion announced earlier this month prompted the The United Food and Commercial Workers Local 7 in Denver to notify members last week that corporate officials do not expect to close stores, unless federal regulators require it.
The merger could result in one or more of the local stores being sold to a separate operating company, corporate officials said.
“Albertsons has advised me ... they expect to adopt all collective bargaining agreements in effect at the time of the close of the sale,” said Kim Cordova, Local 7 president. “They also advised that at this time they do not expect closing any stores as a result of the transaction,” although regulators could require the chain to divest one or more stores.
Cordova said the written reassurance came from Larree M. Renda, Safeway executive vice president, and from Danny Ma on behalf of Andrew J. Scoggin, executive vice president for Albertsons.
The merger will create a diversified network that includes more than 2,400 stores, 27 distribution outlets and 20 manufacturing plants. Albertsons expects to maintain the combined workforce of 250,000 employees, corporate officials said.
That includes several hundred workers employed by the four grocery stores in Grand Junction, said Chris Wilcox, an Alberstons spokeswoman.
The Albertsons stores in Grand Junction are operated by the Southwest division of Albertsons LLC, Wilcox said.
“In many cases involving sales to competitors, the FTC requires some stores to be sold to other grocers in order to maintain competition. And the FTC investigation will determine whether that is necessary here,” she said.
Safeway did not respond to requests for comment.
Federal law requires companies seeking to merge to submit their plans for review to the Federal Trade Commission when the transaction is valued at $70.9 million or more, according to the FTC website.
Federal review is required to determine if Albertsons’ acquisition of Safeway constitutes an unfair monopoly that reduces competition in the local economy.
Both the FTC and Department of Justice share jurisdiction over merger review. Transactions requiring additional review are assigned by one agency to the other on a case-by-case basis, depending on which agency has more expertise with the industry involved, the FTC website said.
Companies must wait 30 days for the review to be completed before they close the deal, according to the website.
Regulators may either terminate the waiting period and allow the merger to go through or extend the review period and seek additional information, the website said.
“The vast majority of deals reviewed by the FTC and the Department of Justice are allowed to proceed after the first, preliminary review,” the FTC website said.
Corporate officials believe economies of scale will allow the unified grocery chain to compete with lower-price super centers like Walmart and its worldwide distribution networks. Prices will go down, not up, as a result of the merger, they said.
Safeway’s new Just For You customer loyalty program will be reviewed and could be retained even though Albertsons is moving to eliminate its loyalty program, corporate officials said.
“From our point of view, this transaction will enable both Albertsons and Safeway to better meet the demands of shoppers in a highly competitive marketplace, where they have more choices than ever,” Wilcox said.
AB Acquisitions, parent company of Albertsons, purchased one hundred (100) percent of the stock of Safeway.
Should the deal withstand regulatory scrutiny, Safeway shareholders expect to receive about $40 per share from AB Acquisitions, corporate officials said.
Some shareholders involved in side transactions with AB could receive a 72 percent premium over Safeway’s closing share price of $23.27 on March 6, 2013, about one year ago, officials estimated.
The merger would place stores from Washington, D.C., to Alaska under the sole control of AB Acquisitions, including Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Albertsons, ACME, Jewel-Osco, Lucky, Shaw’s, Star Market, Super Saver, United Supermarkets, Market Street and Amigos, corporate officials said.
The merger is expected to close in the fourth quarter of 2014 following the satisfaction of customary closing conditions, including approval of the merger by the holders of a majority Safeway’s common stock, corporate officials said.
If the merger fails to close, AB Acquisition would be required to pay Safeway a $400 million termination fee, they said.
AB Acquisition plans to fund the merger with debt financing of about $7.6 billion, equity contributions from current investors of about $1.25 billion.
The merger agreement includes a so-called “go-shop” period, during which Safeway, with the assistance of its financial adviser, Goldman Sachs, negotiates alternative proposals from other parties, corporate officials said in a news release.