Merger of 2 Supermarket Chains Reportedly on Fast Track : Retailing: Sources say negotiators for Ralphs and Yucaipa will soon present a pact to the Ralphs board.
The proposed $2.5-billion merger of two big Southern California supermarket chains has moved onto a fast track and a final agreement could be reached next week, sources said Monday.
Negotiators for Ralphs Grocery Co. and Yucaipa Cos., owner of Alpha Beta and other chains, were able to resolve enough issues that they dropped plans for a tentative pact and instead will soon present a definitive agreement to the Ralphs board, sources said.
Yucaipa, which also owns the Food 4 Less, Boys and Viva chains, seeks to acquire Ralphs from DeBartolo Corp., an Ohio-based real estate development firm. The acquisition would create the Southland’s largest supermarket chain.
Although the papers have not yet been signed and regulatory approval must precede an actual merger, union leaders and others are preparing as if it were a foregone conclusion.
The California attorney general is already reviewing the antitrust implications of the proposed merger, focusing on reduced competition that might result. The new entity would control 27% of the market, compared to Vons’ 19%.
Sources at the attorney general’s office declined to discuss any findings but said the companies had brought the state into the talks early enough to make any dispute resolution easier.
Sources close to the negotiations have said that an undetermined number of Alpha Beta stores would be converted to Ralphs outlets in the event of a deal. Sources also say some Ralphs could be converted to Food 4 Less warehouse stores.
Those probable conversions--and possible store closings--have prompted concerns among Ralphs employees that they might be transferred to Food 4 Less stores where wages, benefits and pensions are less favorable. The United Food and Commercial Workers union told Ralphs employees it would fight such transfers.
“We want those who lose mainstream store positions to be transferred to other mainstream stores,” said Ricardo Icaza, UFCW Local 770 president. “There will be talks at some point. The companies have to worry about morale, so I’m sure they would work with us to ensure an orderly transition.”
Icaza said the union will try to ensure that a merged chain does not convert a mainstream store to a warehouse format if the mainstream store is sufficiently profitable. And it will seek seniority job-transfer guarantees, a provision that does not now apply in cases in which a traditional supermarket is converted to a warehouse format.
Food 4 Less--and other warehouse operators such as Vons’ Expo stores--offer lower prices than mainstream supermarkets such as Ralphs and Alpha Beta. Wages at the warehouse stores are lower because those chains have to compete against non-union operators such as Wal-Mart, Icaza said.
However, a letter from the union to 3,600 Ralphs union members credited Food 4 Less as being “a union company with a history of keeping the union at stores it acquires.”
The companies have made no decisions on store closings or conversions, but Yucaipa executives have made preparations and the necessary inquiries needed to quickly combine the chains’ operations. For example, Yucaipa executives have repeatedly inspected the Ralphs distribution centers in Glendale and Compton, prompting speculation that the firm may shift much of its warehouse operations to those sites after a merger.