Alpha Beta and Ralphs Merger Expected Soon

In a deal that would create Southern California’s largest supermarket chain and remove familiar names from the local grocery scene, Ralphs Grocery Co. and the owner of Alpha Beta stores are expected to announce a $2.5-billion merger on Tuesday, The Times has learned.

The deal between Ralphs Grocery Co. and Yucaipa Cos., which also owns the Boys and Viva chains and Food 4 Less warehouse stores, would be the largest supermarket merger in California history, creating a grocery giant that would surpass longtime leader Vons in sales and store sites.

If the agreement is finalized today, the companies expect to merge their operations in November or December, and Yucaipa would convert all of its Alpha Beta, Boys and Viva markets to either Ralphs or Food 4 Less warehouse stores, sources said. Currently, there are 131 Alpha Beta, 24 Boys and 15 Viva stores.

At the same time, 10 to 30 of the 167 Ralphs stores would be converted to Food 4 Less warehouse stores to meet growing demand for discount prices and an anticipated challenge from Wal-Mart, sources said. Wal-Mart is expected to open a number of California grocery operations under its “superstore” format over the next few years.

If the merger goes forward, the combined company, which would be called Ralphs Grocery Co., may close some poorly performing stores and eliminate some jobs as it consolidates operations. Yucaipa and Ralphs have not decided how many jobs would be eliminated or which stores would close.

The Southland chains controlled by Yucaipa are operated by La Habra-based Food 4 Less Supermarkets, which is valued at about $1 billion. Yucaipa would acquire Ralphs stock from DeBartolo Corp., an Ohio-based real estate development firm that controls Ralphs, under the expected agreement. Yucaipa would assume $1 billion of Ralphs debt and pay about $500 million to Ralphs shareholders, making the total value of the merger $2.5 billion.

The board of directors of Food 4 Less Supermarkets Inc. and the directors of Compton-based Ralphs have already approved the merger, but the deal won’t be final until it is approved by all Ralphs shareholders, sources said.

Such an agreement would face antitrust scrutiny by the state attorney general and the Federal Trade Commission. The merger would create a vast chain controlling about 27% of the California market. Among the major competitors are Vons, the current Southland leader with 19% of the market, Lucky, Albertson’s, Hughes, Stater Bros. and Smith Food & Drug.

In the past, some local supermarket chains have been forced to pare down merger plans in the face of opposition by regulatory agencies.

For example, Alpha Beta’s former corporate parent, American Stores, was permitted to merge Alpha Beta stores with Lucky in Northern California in 1991, but was forced to sell 145 Alpha Beta stores in Southern California to Yucaipa on antitrust grounds.

However, sources at Ralphs and Food 4 Less Supermarkets have said the proposed merger would not be a violation of antitrust laws because competition in Southern California has been increasing.

Many antitrust experts believe that Ralphs and Food 4 Less will be forced to sell some of its stores but that authorities will allow the merger because the Southland has one of the most competitive supermarket environments in the nation.

If the state attorney general and the Federal Trade Commission approve the merger, it would mark the end of Alpha Beta, Boys and Viva.

When Alpha Beta was established in 1915, it immediately took a novel approach: The food retailer was established as a self-service market with products stocked alphabetically to help customers find what they wanted. Hence the name, Alpha Beta, the first two letters of the Greek alphabet.

Over the decades, however, the company lost its distinctive reputation and became an also-ran in the Southland’s supermarket industry wars. Analysts said, among other things, that Alpha Beta relied too long on stores that were built in the early 1960s and that later were surpassed by competition from chains with bigger, more-modern stores.

Yet its corporate parent, Salt Lake City-based American Stores, often was preoccupied with its supermarkets in other parts of the country. By 1988, American decided to buy Southern California’s more vigorous Lucky Stores chain and to place Alpha Beta under Lucky management to revive the faltering stores. Later, when the California attorney general’s office objected to the merger, American decided to keep the Lucky stores and sell the Southern California Alpha Beta operations to Yucaipa.

Boys, founded in 1924, and Viva, established in 1987, were both acquired by Yucaipa in 1989 and placed under the Food 4 Less Supermarkets roof. Until recently, Food 4 Less Supermarkets was the only major supermarket company willing to maintain a large presence in South Los Angeles and other communities with large minority populations.

Times staff writer Stuart Silverstein contributed to this report.