Safeway Files Suit Against Yucaipa

Safeway Inc. has countersued Yucaipa Cos., the Los Angeles investment arm of billionaire Ron Burkle, in a dispute over his failed bid to reacquire the Dominick’s supermarket chain.

Safeway’s filing Wednesday in Los Angeles Superior Court comes in response to Yucaipa’s complaint this month accusing the Pleasanton, Calif.-based grocer of not bargaining in good faith to sell Dominick’s.

Yucaipa alleged that Safeway had no intention of selling Dominick’s back to the company, the suit said, and only negotiated with the investment firm as a way to reach collective bargaining agreements with local union leaders.

Safeway officials deny those allegations and say Yucaipa’s bid was not competitive and had too many conditions.

Safeway’s counterclaim accuses Yucaipa of breach of contract, fraud and “intentional interference” in its efforts to sell the Dominick’s chain.

Yucaipa’s suit seeks to reopen the bidding for Dominick’s. However, Safeway officials say they are moving forward with the sale to an undisclosed company, which reports have identified as Minneapolis-based Super Valu Inc.

Yucaipa officials declined to comment on Safeway’s countersuit other than to say they believe their company was the highest bidder for the Dominick’s chain. Safeway has declined to reveal the value of the winning bid.

Safeway purchased Dominick’s, a Chicago-area chain, from Yucaipa in 1998 for $1.8 billion. Safeway put the 114-store chain up for sale last fall, citing declining sales and profit. Yucaipa had offered Safeway $300 million, plus $50 million in preferred stock for Dominick’s, according to court filings.

Safeway’s shares Thursday gained 3 cents to $24.12 on the New York Stock Exchange.