Talks Under Way to Sell Almost All Alpha Beta Stores

The owner of the Boys Markets and Market Basket chains is negotiating the final details of an agreement to buy nearly all of the 160 Alpha Beta Stores in Southern California, sources familiar with the talks said Friday.

The purchase would make the buyer, privately held Yucaipa Cos. of Claremont, one of the top three grocery store operators in the Southland.

A knowledgeable source cautioned, however, that the deal still could be revised substantially or could even fall apart. This source said he expected a final decision to be made over the next few days.

The value of the deal was estimated at $325 million, but sources said the amount could change substantially after the final details are resolved.

Officials of Salt Lake City-based American Stores, which owns Alpha Beta, and Yucaipa have negotiated on and off for months, but have declined to comment publicly on their talks. The deal currently under negotiation was first disclosed in Supermarket News, a weekly trade publication.

According to the Supermarket News report and sources who asked not to be identified, Yucaipa is negotiating to buy about 145 Alpha Beta stores. Many would come under 5Yucaipa’s Food 4 Less banner, while others likely would be divided among the company’s other main Southern California operations: Boys, Market Basket, ABC Markets and Viva.

The approximately 15 Alpha Beta stores not being sold to Yucaipa are located in the San Diego area. They are expected to be kept by American and included in its Lucky supermarket chain.

Alpha Beta’s aging warehouse in La Habra also would be left out of the purchase, but the 1.5-million-square-foot facility would be leased by Yucaipa.

Under an agreement reached in May with then-California Atty. Gen. John K. Van de Kamp, American Stores pledged to sell all of its Alpha Beta stores within five years. Van de Kamp had sued American Stores after the company bought Lucky Stores for $2.5 billion in 1988 and sought to merge it with Alpha Beta to create what would have been the biggest grocery chain in Southern California.

Attorneys for the state contended that the proposed merger would have reduced competition, costing California consumers $200 million a year in higher prices.

American’s initial efforts to sell Alpha Beta flopped. Sources said Yucaipa was the only bidder then, and its initial offer fell far below the roughly $500 million that had been sought by American.

In October, American announced that it would make “a significant capital investment” in Alpha Beta to spruce it up and help attract a buyer. Talks soon resumed with Yucaipa, but the tight-lipped Claremont company initially was said to be negotiating for roughly half of Alpha Beta stores.

By one account, the reluctance of the state Attorney General’s Office to rewrite the antitrust settlement to permit American to keep more than a handful of Alpha Beta locations forced Yucaipa to bid for more stores. Sources said the Attorney General’s Office recently has given American approval to keep the San Diego stores not being bought by Yucaipa.

In Southern California, Yucaipa operates stores mainly in minority neighborhoods. It also has stores in the Midwest and Rhode Island.

According to the most recent figures from the Southern California Grocers Assn., Yucaipa owns 66 stores in the southern half of the state, and the Alpha Beta acquisition would bring its store total to 212.

After the deal, Lucky apparently would remain the No. 2 chain in Southern California, with 209 stores now and the 15 stores Alpha Beta stores it would gain in the San Diego area.

Vons is Southern California’s biggest chain, with about 320 stores.