Ralphs and Owner of Alpha Beta to Sell Stores : Retailing: Divestiture of 27 outlets, approved by state attorney general, is likely to pave way for California’s largest grocery merger.
Ralphs Grocery Co. and the owner of the Alpha Beta chain have agreed to sell 27 of their nearly 400 Southern California stores in an antitrust settlement that is likely to pave the way for the largest supermarket merger in California history.
The store divestitures were approved by the two chains and the California attorney general and were announced Wednesday after months of negotiation. The Federal Trade Commission will also scrutinize the proposed merger and divestiture plan but is expected to approve the supermarket union.
State antitrust regulators have been studying the possible anti-competitive ramifications of the proposed deal since September, when Yucaipa Cos.--owner of the Alpha Beta, Boys, Viva and Food 4 Less chains--announced plans to acquire the 121-year-old Ralphs chain.
“While litigation to protect consumers was certainly available as an option,” Atty. Gen. Dan Lungren said, “I am pleased that the merging parties came early to the table to negotiate this result, allowing the state to avert a lengthy and expensive court battle.”
The two chains also agreed to reimburse the state for about $400,000 in attorney’s fees and other expenses, said Lawrence Tapper, a deputy attorney general involved in the negotiations.
The 27 stores to be sold--most of them Alpha Betas--were selected after regulators identified regions that have high concentrations of stores owned by the two supermarket giants. For example, in Los Angeles, there are three Ralphs along the 3rd Street corridor that runs through Hancock Park and the Fairfax District--one at La Brea Avenue, one at Fairfax Avenue and one near La Cienega Boulevard. There is only one major challenger in the area--an Alpha Beta store at Wilshire and Hauser boulevards. The companies agreed to sell the Ralphs at 3rd and Fairfax.
Under the settlement agreement, major competing supermarket chains and smaller independent grocers will be allowed to bid for the 27 stores. If the company doesn’t receive a fair offer from a grocer for a particular store, it can seek state approval to put a different outlet on the sales block, a Ralphs executive said.
“The 27-store divestiture is huge and hurtful,” said Jan Charles Gray, senior vice president at Ralphs and spokesman for both companies. “But we agreed to it to move the planned transaction along. We believe this transaction will be good for consumers.”
About 800 people are employed in the 27 stores. Many workers with adequate seniority will be retained under union contracts, while others could be laid off. However, the combined company will probably expand, and any displaced workers would be the first hired for new positions, said Rick Icaza, president of the Los Angeles office of the United Food & Commercial Workers union.
If the merger is consummated, the Alpha Beta, Boys and Viva store formats will vanish from the local grocery landscape. Most of those stores will be converted to Ralphs and the rest will become Food 4 Less warehouse stores. In addition, some Ralphs will be converted to the Food 4 Less discount format.
There are 173 Ralphs, 128 Alpha Beta, 45 Food 4 Less, 22 Boys and 7 Viva stores--375 in all. Under the settlement, the new combined chain would have 348 stores, eclipsing Vons, which currently leads with 336.
The new chain would also leapfrog Vons and become the sales leader in Southern California. The merged company would have a market share of about 27%, compared to Vons’ 19%. Several antitrust experts have said this degree of concentration is not necessarily cause for alarm.
If the FTC also approves the merger, Ralphs’ Gray said the combined company will be able to better compete on prices with Vons and Lucky--which currently rank No. 1 and No. 2, respectively, in Southland sales. Vons and Lucky have declined to comment on the merger plan.
However, one food industry executive called on federal regulators to block the merger, contending that the new entity would have too much clout. The FTC does not comment on cases under review and would not discuss the state’s antitrust settlement.
“Any time a major competitor is eliminated, it’s not healthy for the consumer,” said the executive, who asked for anonymity. “This marketplace has functioned very well because it’s been so competitive.”
Some consumer groups also remain leery of the deal. If unchecked, it could lead to additional mergers and the kind of consolidation that leads to big price hikes, said Ken McEldowney, director of San Francisco-based Consumer Action, a statewide group.
“After all, this is not two small chains trying to get some clout,” he said. “These are two chains that already have large market share who are combining to get largest market share.”
The new entity probably wouldn’t take the lead in price cutting. Ralphs has not been as aggressive on prices as Lucky and Vons, said Ed Comeau, an industry analyst at Lehman Bros. in New York.
The two companies hope to complete the merger in mid-January.
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Supermarkets to be Sold in Merger
Merger partners Ralphs and Yucaipa Cos. agreed with the California attorney general to sell these 27 supermarkets in Southern California, leaving 348 in the combined chain, the region’s largest:
AREA: Orange County
STORE: Alpha Beta
ADDRESS: 420 W. 17th St., Santa Ana
*
AREA: Orange County
STORE: Alpha Beta
ADDRESS: 1250 E. Chapman Ave., Fullerton
*
AREA: Orange County
STORE: Alpha Beta
ADDRESS: 2050 N. Tustin Ave., Orange
*
AREA: Orange County
STORE: Alpha Beta
ADDRESS: 13321 Artesia, Cerritos., Cerritos
*
AREA: Orange County
STORE: Ralphs
ADDRESS: 93 Calle De Industrias, San Clemente
*
AREA: Orange County
STORE: Alpha Beta
ADDRESS: 27142 La Paz, Mission Viejo
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 16000 Woodruff, Bellflower
*
AREA: Los Angeles County
STORE: Food 4 Less
ADDRESS: 6436 E. Spring, Long Beach
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 5130 190th St., Torrance
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 209 Arbor Vitae, Inglewood
*
AREA: Los Angeles County
STORE: Ralphs
ADDRESS: 6350 W. 3rd St., Los Angeles
*
AREA: Los Angeles County
STORE: Boys
ADDRESS: 10811 S. Main St., Los Angeles
*
AREA: Los Angeles County
STORE: Boys
ADDRESS: 4373 S. Vermont, Los Angeles
*
AREA: Los Angeles County
STORE: Viva
ADDRESS: 1035 S. La Brea, Inglewood
*
AREA: Los Angeles County
STORE: Boys
ADDRESS: 1141 W. Carson St., Torrance
*
AREA: Los Angeles County
STORE: Boys
ADDRESS: 6695 Green Valley Circle, Fox Hills
*
AREA: Los Angeles County
STORE: Viva
ADDRESS: 5520 Sunset Blvd., Hollywood
*
AREA: Los Angeles County
STORE: Ralphs
ADDRESS: 8340 Van Nuys Blvd., Panorama City
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 12431 Burbank Blvd., North Hollywood
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 11900 Balboa Blvd., Granada Hills
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 22275 Mulholland Hwy., Calabasas
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 6227 Topanga Canyon, Woodland Hills
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 725 E. Main Street, Alhambra
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 140 E. Duarte, Arcadia
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 2037 Durfee, El Monte
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 7619 E. Garvey, Rosemead
*
AREA: Los Angeles County
STORE: Alpha Beta
ADDRESS: 4911 N. Santa Anita, El Monte
