Posted: 11:26 p.m. Thursday, March 6, 2014

Albertsons says there are no immediate plans for Safeway closures

(AP Photo/Paul Sakuma, File)

By Jana Katsuyama


The merger deal announced Thursday between Safeway and Albertsons has sparked many questions about what would happen to the Bay Area based Safeway grocery store chain.

The merger is far from being a done deal, however Safeway has a so-called "go shop" window to solicit and accept proposals from other companies. There are also anti-trust proceedings that would need to be completed.

An Albertsons' spokeswoman told KTVU late Thursday night that if the proposed merger succeeds, it would not involve any store closures, changes to the Safeway name or changes to the Safeway rewards program.

Albertsons spokeswoman Chris Wilcox told KTVU there has been no decision yet about what to do with Safeway's corporate offices in Pleasanton. One business expert says that is most likely where layoffs could occur to eliminate duplication.

Safeway and Albertsons announced the merger Thursday afternoon in a deal reportedly worth $9 billion.

The deal would combine the second and fifth largest U.S. grocery store chains. Safeway is the second-largest in the U.S. after Kroger by revenue. Albertsons - which is controlled by Cerberus Capital Management, L.P. -- ranks fifth.

"I like the deals that I get at Safeway. You know, you come and if you're a club member, you get the coupon deals and better bang for your buck," said Fre Johnson, a Safeway shopper who spoke with KTVU outside the Oakland store.

Johnson and other Safeway shoppers worry the merger might impact Safeway stores' quality, costs, and customer service.

Safeway operates 1,335 stores in 20 states. That would greatly add to Albertson's 1,075 stores in 29 states.

Albertsons' statement Thursday said the merger would result in a wider range of items, lower prices, better fresh products, and store renovations.

"This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country," said Albertsons' Chief Executive Officer Bob Miller in a prepared statement. "Working together will enable us to create cost savings that translate into price reductions for our customers."

The Safeway-owned store brands include Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs stores.

Albertsons' brands include Albertsons', ACME, Jewel-Osco, Lucky, Shaw's, Star Market, Super Saver, United Supermarkets, Market Street and Amigos.

A union official with the United Food and Commercial Workers Union, Local 5 says it represents workers at Safeway stores. The union previously represented workers at Albertsons' stores and say those workers suffered when Cerberus bought the Albertsons chain in 2006.

"It was detrimental to our membership in terms of layoffs and hour reductions and loss of health and welfare and pensions and so forth and we don't want it repeated at Safeway," said Mike Henneberry, a spokesman for UFCW Local 5.

Albertsons officials said they plan to fund the merger in part with debt financing of approximately $7.6 billion, equity contributions from its current investors and their affiliates, partners and co-investors of approximately $1.25 billion, and cash on hand of Safeway.

"They're facing a lot of pressure from some atypical competitors, Target, Walmart, these are broad retailers who weren't always in the grocery business but now are," said Jennifer Chatman, a UC Haas Business School Professor who specializes in organizational behavior.

Chatman says merging the two former competitors into one grocery chain will be a challenge. She says she would advise the companies to draw attention to their shared history, which could help smooth the transition.

"Both chains were founded in Idaho," Chatman told KTVU," Joe Albertson actually worked for Safeway for 10 years from 1929-1939 before he became an entrepreneur opened his own grocery in Idaho."

Longtime customers say they hope for the best.

"Hopefully Safeway can just upgrade it and be a little more organic and a little more refined, without the prices going up," said Tom Paratore of Oakland.

Albertsons' CEO Bob Miller would become executive chairman of the new combined company. Robert Edwards, Safeway's current President and Chief Executive Officer, would become President and Chief Executive Officer.

The companies 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 of the outstanding shares of Safeway common stock and regulatory approvals."

The statement states that Safeway has a "go-shop" period of 21 days to work with its financial advisor Goldman Sachs to "actively solicit, receive, evaluate and potentially enter into negotiations with parties that offer alternative proposals." There will be a 15 day period following those three weeks when Safeway will be able to select a different proposal. Any competing bidder would have to pay termination fees of up to $250 million dollars.

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