No competitors outbid Albertsons for Safeway grocery chain

San Jose Mercury NewsApril 1, 2014 

The Albertsons takeover of the bigger Safeway supermarket chain has cleared its first hurdle.

The $9.4 billion deal announced four weeks ago by Albertsons’ principal owner, New York private equity firm Cerberus Capital Management, would merge Safeway, the nation’s second-largest supermarket chain, with Albertsons, the fifth-largest. But the deal had an escape hatch for Safeway: Someone else could make a better offer before March 27.

That deadline passed last week. Safeway said Friday that no one else was interested in buying the Pleasanton, Calif.-based chain.

The deal still awaits approval from shareholders, and, more critically, from the Federal Trade Commission, which will, in as little as a month, determine whether Cerberus can merge the two chains and how many stores it needs to shed to meet federal antitrust rules.

Albertsons, based in Boise, says it has no plans to close Safeway stores, though it may divest some to fend off antitrust action. But industry experts say store closings are almost certain in California, where Safeway and Albertsons have a combined 678 stores, about three times the number in its second-largest market.

“California is a place where they have a lot of market power,” said Samina Karim, professor in the School of Management at Boston University.

In neighborhoods where an Albertsons is down the street from a Safeway, for instance, one of those stores could close.

The two chains overlap in Southern California, and while Northern California no longer has any Albertsons stores. Other areas where Cerberus may be closing stores: Washington, Oregon, Colorado, Arizona and Texas, where each chain has a large footprint, and where each has considered the other a competitor.

Without store closures, the merged company will have about 2,400 stores, almost twice the size of Safeway today, and just slightly fewer than the roughly 2,600 stores owned by rival Kroger, whose chains include Fred Meyer. The operation will have about a quarter-million employees.

Experts say some jobs will be lost. “You certainly don’t need two corporate headquarters, so there are going to be a whole bunch of people gone in human resources, in marketing and in IT systems,” said Dale Achabal, executive director of the Retail Management Institute at Santa Clara University.

The Idaho Statesman contributed.

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