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Vons Agrees to Merge With Detroit Supermarket Chain in Deal Worth $660 Million

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Times Staff Writer

Vons, the California supermarket chain that bills itself as the “more store,” has agreed to merge with a smaller chain of Detroit-area supermarkets in a deal valued at $660 million.

The merged company would keep the name Vons Cos. With combined sales of $3.4 billion, it would rank near the top 10 publicly held supermarket companies.

If the deal goes through, Vons would become a publicly held company less than a year after being taken private. It became a private company in January in a $653-million leveraged buyout engineered by Vons’ chairman and other investors.

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Based in El Monte, Vons has about 190 supermarkets in California and Nevada. The merger would extend Vons’ retail network past Las Vegas for the first time in the company’s 80-year history.

The other company, Allied Supermarkets, operates 23 supermarkets, mainly in the Detroit area, under the name Great Scott! It also owns Abner Wolf, a wholesale grocery company, and a drug store. The company, which had revenue of $386 million for the fiscal year ended June 12, has about 1,700 employees.

The deal, which is expected to be completed by the end of the year, is contingent on obtaining financing, regulatory approval and the agreement of the boards of directors and shareholders of each company. Vons would assume $440 million in new debt as a result of the merger--valued by the companies at about $660 million, based on the current market price of Allied stock.

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Some observers viewed the additional debt created by the merger of Vons and Allied as a defensive move to ward off any future hostile takeover attempt at Vons. But Vons’ owners, who stand to reap big profits as a result of the merger, say that was not the motivation.

“The new holding company will have a larger equity base to support the corporation’s expansion plans,” Roger E. Stangeland, Vons chairman and chief executive, said. “This growth includes building new stores . . . and the upgrading of present facilities to conform to Vons’ and Allied’s strategic plans.”

Allied stock closed Friday at $7.875 a share, up 50 cents, in composite trading on the New York Stock Exchange. Vons stock is not publicly traded.

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Under the agreement, a new publicly held holding company would have two operating units: Vons, with headquarters in El Monte, and Allied, with headquarters in Detroit, said Stangeland.

Vons’ owners would get $160 million in cash plus 8 million, or 36.4%, of the 22 million shares to be issued by the new company, he said. Each of Allied’s current 14 million common and preferred voting shares would be exchanged for one share of the new company.

Vons is one of the leading supermarket chains in Southern California, with 1986 revenue of nearly $3 billion. It is the second-largest privately held company based in Southern California, behind USA Petroleum.

GROCERY SHOPPING IN THE SOUTHLAND

Shopper traffic in local supermarkets was measured in a telephone poll of 1,000 households in Los Angeles and Orange counties. As part of the May-June poll, people were asked “Last week, at what store did your household buy the majority of your groceries?” Here are the results:

Ralphs 20.4% Vons 17.5% Lucky 14.0% Safeway 7.4% Alpha Beta 7.2% Hughes 5.4% Boys Markets 4.5% Gemco 4.0% Albertson’s 3.6% Other 16.0% Source: Los Angeles Times Marketing Research

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