Albertson’s in Negotiations to Shed 80 Markets

Albertson’s is negotiating to sell about 80 supermarkets to two rivals to help clear the way for its pending acquisition of American Stores, people familiar with the talks say.

If completed, the sale of 40 stores apiece to Stater Bros. and Ralphs parent Fred Meyer would further change the competitive landscape in California, giving Stater Bros. a greater presence in Los Angeles and Orange counties while expanding the operations of Fred Meyer in Northern California.

Analysts said Albertson’s is under regulatory pressure to shed as many as 120 stores, primarily in California, Nevada and New Mexico, where Albertson’s and American Stores overlap.

Stater Bros. Chief Executive Jack Brown acknowledged that his company has been “holding ongoing discussions” with Albertson’s about buying certain store locations, but he declined to be more specific.

“We believe we will acquire some of their divested stores in areas where Stater Bros. does not serve Southern California shoppers,” Brown said. Stater Bros. now owns 112 stores, mainly in the Inland Empire.

Fred Meyer operates 20 Cala Bell markets in Northern California. It could not be learned if the stores acquired from Albertson’s would be converted to Cala Bell or another name. Fred Meyer is being acquired by Kroger, the nation’s largest grocery chain. Executives of Ralphs and Kroger declined to comment. Fred Meyer officials could not be reached.

Albertson’s confirmed plans to sell stores to satisfy state and federal regulators, who have not yet approved its acquisition of American Stores, parent of the Lucky supermarket and Sav-on drugstore chains. Representatives declined to be more specific.

Boise, Idaho-based Albertson’s agreed to pay $8.3 billion in stock in August to acquire American Stores. It also plans to assume $3.4 million in debt, giving the transaction a total value of $11.7 billion at the time the deal was announced. The combined company will have about 2,470 stores in 37 states, minus any it sells to complete the merger. The company has not said whether its California stores would operate under the Lucky or Albertson’s name.

Shareholders of both Albertson’s and American Stores approved the deal in November, but antitrust scrutiny has taken longer than expected.

Doubts about the ability of the companies to complete the deal has affected their stock prices, Lehman Bros. analyst Meredith Adler in New York said. Albertson’s shares, at $52 on Thursday, are down 23% from their recent peak. American Stores, at $31.69 now, is down 19% from its recent peak. Both trade on the New York Stock Exchange.

Albertson’s spokesman Michael Read says he expects the deal to be completed in the next several weeks. Officials with the Federal Trade Commission and the state attorney general’s office declined to comment on the merger.