Burkle May Buy Back Supermarket Chain

As Yogi Berra might say, it’s deja vu all over again for Los Angeles investment magnate Ron Burkle.

More than four years after selling Chicago-area Dominick’s Supermarkets at a hefty profit to Safeway Inc., Burkle is in talks to buy the company back, a person close to the deal said Monday.

Officials with Pleasanton, Calif.-based Safeway declined to comment. Ari Swiller, spokesman for Burkle’s Yucaipa Cos., also declined to talk.

Safeway bought the 113-store chain in late 1998 for $1.8 billion in cash and debt, but sales and market share have slumped under its management. In its first-quarter report last week, Safeway said it has written down the value of Dominick’s from more than $700 million to about $400 million.

Burkle purchased Dominick’s from founder Dominick DeMatteo in 1995. Over the next three years, he helped develop its successful “Fresh Store” concept with an expanded produce section and more prepared meals.

After taking the company public in 1997, Burkle, then chairman, sold it to Safeway for $1.2 billion plus the assumption of $646.2 million of Dominick’s debt.

But turning the same kind of profit on Dominick’s as he did on his other grocery investments such as Ralphs Grocery Co. and Fred Meyer could be difficult, analysts say.

The chain’s labor contracts expire at the end of July, so negotiations could become an issue for the new owner. And Dominick’s lacks senior management, since much of the chain’s corporate functions and buying were being handled out of Safeway headquarters.

“Whoever buys it will have to bring a lot of bodies and structure to the whole thing,” Meredith Adler of Lehman Bros. said.

Burkle, a billionaire who started his career as a bag boy at his father’s grocery store, built his investment firm buying and merging large grocery chains such as Alpha Beta, Food 4 Less and Ralphs Grocery Co. before investing and selling stakes in Kmart Corp. and a number of technology companies.