American Stores Hopes to Sell 161 Stores as Package

American Stores Co. pledged Thursday to sell 152 Alpha Beta and 9 Lucky supermarkets in Southern California as a package instead of piecemeal, but industry analysts said a buyer for the entire chain would be hard to find in the current retail market.

The company, which has spent two years trying to merge the two operations into one chain, agreed Wednesday to sell the stores within five years as part of a legal settlement with the California Attorney General’s Office.

Michael T. Miller, senior vice president for Salt Lake City-based American Stores, said the company has no prospective buyers lined up. In fact, he said, it has yet to even hire an investment banker to put the deal together.

“This issue of selling Alpha Beta is something that evolved in the last eight days,” Miller said Thursday. “We had no premature indication that we would go in this direction. We hadn’t had an opportunity to even consider who might be possible buyers. I assume that there might be a number of chains . . . interested in going into the most dynamic growth market in the United States.”

But the most dynamic growth market is also among the most competitive, retail analysts said. They think American Stores will be hard-pressed to keep the chain together. Miller said that if the 161 stores can’t be sold together within three years, the company will consider breaking them up.

“Given the market conditions and availability of money, it’s not a great market to go out and sell stores,” said Neil Stern, a partner in the Chicago retail consulting firm of McMillan/Doolittle. “There are not a lot of buyers. And it’s a huge acquisition for one.”

Stern also said the stores don’t make a particularly attractive package because most are around 35,000 square feet--half the size of supermarkets being built today.

Who might buy? Most industry experts refused to name names, but they did speculate Thursday about the kind of operation that might be interested. John B. Kosecoff, managing director at the New York investment firm of First Manhattan Co., said it could be a California chain wishing to gain size and economy of scale or a chain outside the state desiring a presence here.

Another analyst said large grocery wholesalers such as Super Value in Minneapolis and Fleming Foods Co. in Oklahoma City could find the chain attractive.

Stern said he could think of only two possible takers and, even then, the match between buyer and seller would not be perfect.

“Albertson’s has the money, but generally does not buy stores--instead builds them,” he said. “The only other company that publicly announced a commitment to California is Smith’s Food King.”

Ron Knechtel, a manager at Alpha Beta’s office and warehouse center in La Habra, said Alpha Beta management had discussed three options for the company, including a buyout by former Alpha Beta executives. Smith’s Food King of Arizona has expressed interest in buying Alpha Beta to gain entry to the California market, Knechtel said, and management has said it would welcome Japanese investors.

Knechtel told more than 100 employees at the La Habra facility Thursday morning that their jobs are not in jeopardy and that the company would be better off with another owner.

Not all agreed with his view. John C. Sperry, president of the Buena Park-based United Food and Commercial Workers union Local 324, which represents 3,660 of the estimated 12,000 Alpha Beta employees in Southern California, said through a spokesman: “I believe that John Van de Kamp jumped the gun on this issue. In the long run, it will harm the employees and the consumer. It will harm the employees because of the loss of jobs. It will harm the consumer with higher prices when these stores are sold off to independent market owners instead of food-industry chains.”

Sperry had a surprising ally in John M. Lillie, former Lucky chairman. In a Thursday letter to Van de Kamp, Lillie said that the Southern California grocery market has become “somewhat less competitive in recent years” and the settlement would not resolve the problem.

“The sale of Alpha Beta will most likely produce another weak competitor that will have no favorable impact on price competition,” he wrote. “The Lucky/Alpha Beta combination would have produced major cost savings which would have supported consumer prices.”

American Stores stock rose $3.50 on the New York Stock Exchange Thursday, to close at $69. Analysts and company officials said the investor reaction was part relief and part support. “I think the settlement was what people have been waiting for,” Stern said.

Staff Writer Cristina Lee in Orange County contributed to this story.