Next Big Sale Has Ralphs Employees, Union Concerned

With no word on a buyer for Ralphs Grocery Co., employees of the Southern California chain say they are growing anxious and uncertain about their jobs.

Union officials representing Ralphs employees dispatched letters of concern over the weekend to the current owner of the supermarket chain--Federated Department Stores--and to the two firms competing to acquire the Cincinnati company.

If a buyout leaves Ralphs too heavily in debt, the union said, then it may be endangering employee wages, pensions and other benefits.

The fate of the 129-store supermarket chain, which employs 15,000, has been in limbo since Federated put Ralphs up for sale last month as part its defense against an unwelcome takeover attempt by Campeau Corp. of Toronto.

Federated, which also owns Bullock’s, Bloomingdale’s and I. Magnin, has since accepted a $6-billion buyout offer from R. H. Macy & Co. Meanwhile, Campeau has launched a tender offer for Federated stock.

“Many jobs and lives will be disrupted with this takeover,” said Nina Sutton of Burbank, a checker who has worked for Ralphs since 1968. Customers are also concerned, she said. “All day long, people ask us (what is going to happen), like we’re suppose to know.”

Federated is expected get upward of $1 billion for Ralphs. The chain’s current management and Lucky Stores are said to be the leading contenders among half a dozen bidders seeking to acquire the supermarket company. Under terms of collective bargaining agreements, a new owner of Ralphs would have 30 days to determine and adjust for its employment needs.

Union officials and employees believe that a buyout by Ralphs’ current management would be the least disruptive to their job security, said Ricardo F. Icaza, president of the United Food and Commercial Workers International Local 770.

On Feb. 12, Icaza sent a letter to Ralphs Chairman and Chief Executive Byron Allumbaugh suggesting that employees could participate in the buyout through an employee stock ownership plan. Allumbaugh was not available Friday to discuss any aspect of the buyout, his secretary said, and Icaza said Allumbaugh has not replied to the union’s letter.

The union, which represents about 3,000, or 20%, of Ralphs’ employees, has also hired the investment banking firm of Lazard Freres & Co. in New York to explore such a stock purchase plan.

A possible sale to Lucky holds special concern for employees, Icaza and others said. That’s because Lucky already has distribution, buying and administrative offices in Southern California where Ralphs has its headquarters. In an effort to reduce duplication, trim overhead and cut costs, Lucky could lay off personnel, they fear.

Icaza believes that the Federal Trade Commission could also order Lucky to sell some stores because of antitrust problems stemming from the chain’s dominance of the huge Southern California food market. The piecemeal sales of such stores might also lead to layoffs, he said.

In letters to Federated, Macy and Campeau last Friday, Icaza expressed union concerns about the sale of Ralphs through a leveraged buyout whereby the assets of the company would be used to finance the sale.

Such a deal would put Ralphs highly in debt, he contended, and “will probably render Ralphs insolvent.”

Since Ralphs has substantial obligations to employees with respect to matter such as wages, employee benefits and pension benefits, such a buyout would make workers creditors of the company, according to the letter.

“This sale by Federated pursuant to your offer will probably render Ralphs insolvent, or leave Ralphs seriously and unreasonably undercapitalized, all to the substantial detriment of the employees, locals and other trade creditors,” the letter said.

As a result, the letter went on, “these proposed transactions appear to be fraudulent vis-a-vis the rights and claims of the employees” under California law.

Icaza said in an interview that the companies must look beyond the “billions of dollars. What about the impact on people?”