After two years of operating under the “Campeau cloud,” Ralphs Grocery Co., the Southland’s No. 3 supermarket chain, got a new owner Monday and will proceed with expansion and remodeling plans.
The supermarket’s access to financing for a long-planned modernization program was complicated in 1990 when its parent company, Federated Department Stores, filed for bankruptcy protection from creditors. The troubles began when Federated was purchased by Canadian real estate mogul Robert Campeau in 1988.
Although Ralphs was technically never part of the bankruptcy filings of Federated and Allied Stores Corp. under the Campeau umbrella, Federated’s Chapter 11 filing set off rounds of embarrassing consumer questions for Ralphs.
After more than a century doing business in Southern California, Ralphs spent the last two years explaining to shoppers that it was largely unaffected by the bankruptcy of its parent. That ended Monday, when Southern California’s oldest supermarket chain finally got a new group of owners under the bankruptcy reorganization plan for Campeau’s holdings. Federated and Allied are due to emerge from bankruptcy protection today.
“The cloud of uncertainty is lifted,” said a pleased Byron Allumbaugh, chairman and chief executive of the 158-store chain that has consistently ranked with Von’s and Lucky’s as Southern California’s top three supermarkets. “We will get on with our game plan. We are no longer tangled in Campeau’s problems.”
Allumbaugh said Ralphs will aggressively proceed with its earlier plans to build another 50 supermarkets in the competitive Southern California market over the next five years and remodel 20 to 25 stores over the same period.
The remodelings will include the addition of hot- and cold-service delicatessens and bakeries as well as expansion of the stores’ floral, produce and general merchandise departments.
Allumbaugh said it should be easier for the company to get financial backing now that Ralphs has been transferred to a new group of owners, led by Edward J. DeBartolo Corp., a real estate development and holding company based in Youngstown, Ohio. DeBartolo holds a 60.3% stake in the grocery chain.
Other new owners include Bank of Montreal, with a 10.1% stake; Banque Paribas, 10.1%; Camdev Corp., 12.8%, and Federated Department Stores Inc., 6.6%. Like DeBartolo, the other owners had been owed money by Campeau’s retailing operations.
“Ralphs had been hampered by the financial questions that swirled about,” said Sheila O’Connell, a supermarket analyst with Duff & Phelps of Chicago. “They constantly had to explain away their parent corporation’s problems. Now it’s going to be a lot better for them.”
Allumbaugh said the supermarket chain will also pursue its previously announced intention to become a publicly held company for the first time in its 119-year history. He said all that remains to be decided is “the timing” of the sale of stock to the public. The matter is sure to be discussed at the first meeting of the company’s new board of directors Feb. 27, he added.
James H. Stevenson, director of the Food Industry Management Program at USC, said the “Campeau cloud” that engulfed Ralphs the last two years did little damage to its operations and should not prevent the company from doing well in the future.
“Ralphs is a sound, solid organization that did well under its previous owners and should do well for its new owners,” Stevenson said.