FTC Requires Safeway, Albertsons To Sell 168 Stores Before Completing $9.2B Merger

Last March Albertsons supermarket owners Cerberus Capital Management and AB Acquisition LLC announced that they would acquire the Safeway chain of stores in a merger valued at more than $9 billion, but as with most deals of such magnitude, the new coupling between the second- and fifth-largest grocers in the United States had to pass regulatory muster before they could proceed down the aisle. Today, the chains announced they would sell 168 stores in eight states in order to make their matrimonial dreams a reality.

The Federal Trade Commission announced the supermarket chains agreed to sell 168 stores to settle charges that their proposed $9.2 billion merger would likely be anticompetitive in Arizona, California, Montana, Nevada, Oregon, Texas, Washington, and Wyoming.

According to the FTC proposal [PDF], the proposed deal between Albertsons and Safeway would lessen supermarket competition, and hurt consumers choices in 130 local markets unless the companies agreed to divest certain locations.

Officials with the FTC say that had the merger continued as is, customers would have likely seen higher prices and lower quality supermarkets.

When the merger was first announced in March 2014, fifth-largest grocer Albertsons operated 630 supermarkets under the Albertsons name in 15 states and 445 stores under the Jewel-Osco, ACME, Shaw’s and Star Market names in the eastern United States.

The nation’s second-largest grocer, Safeway, operated 1,332 stores under the Safeway, Tom Thumb, Randall’s, Pak ‘n Save, The Market, Vons, Pavillions, and Genuardi’s names throughout the country.

Under the proposed divestiture deal, Haggen Holdings LLC, which operates Haggen Food & Pharmacy stores, will acquire 146 Albertsons and Safeway stores in Arizona, California, Nevada, Oregon, and Washington.

Supervalu Inc., the owner of brands such as Cub Foods and Shop ‘N Save,  will acquire two Albertsons stores in Texas. The company has a complicated history with Albertsons. In 2006, the supermarket brand was divided between Cerberus and Supervalu, with the latter controlling around 2/3 of the stores under the Albertsons marquee. Then in 2013, Supervalu sold its remaining Albertsons, along with its ACME Markets, Shaw’s, and Jewel-Osco stores to Cerberus, briefly reuniting all the Albertsons stores under one company.

Associated Wholesale Grocers, Inc. – which operates chains such as Price Chopper and Sun Fresh – will purchase 12 Albertsons and Safeway stores in Texas, while Associated Food Stores Inc. – which operates Ridley’s Family Market and Lee’s Marketplace among other brands – will acquire eight Albertsons and Safeway stores in Montana and Wyoming.

The agreement between Safeway and Albertsons to sell the 168 stores will be subject to public comment for 30 days after it is published in the Federal Register.

FTC Requires Albertsons and Safeway to Sell 168 Stores as a Condition of Merger [Federal Trade Commission]

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