Safeway Agrees to Sell 60 Stores to Borman’s
Safeway Stores, as part of its continuing attempt to grapple with the heavy debt load left from last year’s leveraged buyout, said Wednesday it has agreed to sell its 60-store Salt Lake City division to a Detroit-based grocery store chain.
Terms of the sale to Borman’s, which operates 83 Farmer Jack supermarkets primarily in the metropolitan Detroit area, were not disclosed. Sales of the division, which operates stores primarily in Utah, Idaho and Wyoming, were about $350 million in 1986.
Safeway, with headquarters in Oakland, also said it is reviewing eight of its other divisions for possible sale. Neither of the California divisions is affected, the company said.
Borman’s purchase is contingent on obtaining financing and negotiating new labor agreements that would cut costs, spokesman Gilbert Borman said. No decision has been made on whether Borman’s will change the names of the Safeways it has agreed to buy, he said.
The proposed sale would be the fourth major action since last year’s $4.2-billion buyout by the investment banking firm of Kohlberg Kravis Roberts & Co., which took Safeway private. Safeway Chairman Peter A. Magowan said last November that union response to requests for lower labor costs would play an important role in deciding which divisions would be sold or closed.
After the buyout, “we said the first thing we were going to do was sell our overseas operations before we would look at our U.S. operations,” Safeway spokesman Robert Bradford said. “We knew at the time that we would have to carefully evaluate divisions in the United States.”
Safeway subsequently sold its 20% interest in Woolworths Limited of Australia and its 240-store division in Britain.
Safeway confirmed last month that it plans to close or sell 24 Southern California stores that were deemed too old or too small.
Bradford said Safeway has no plans to sell six divisions: Southern California, Northern California, Phoenix, Seattle, Portland, Ore. and Washington, D.C. But the remaining eight divisions--Dallas, Houston, El Paso, Denver, Kansas City, Oklahoma City, Little Rock, Ark. and Richmond, Va.--are all under scrutiny because of comparatively high labor costs, he said.
“We are talking to the unions in those areas and we also have entertained bids and talked to people who are interested in purchasing” assets, Bradford said. “If we can’t achieve labor parity we may end up selling some of those,” he said.
Al Zack, a spokesman for the United Food and Commercial Workers Union, said, “The local union is trying to reach out to Borman to try to negotiate with them. The primary concern of the local union as they relay it to me is to make sure the people have their jobs.”