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From Antitrust Law Daily, December 22, 2014

Albertsons, Safeway stores to be sold in effort to win FTC approval of merger

By Jeffrey May, J.D.

An FTC decision on the combination of supermarket giants Albertsons and Safeway is likely in the coming days. On Friday, the supermarket chains announced plans to sell 168 stores across eight states to secure FTC clearance of the companies' planned merger, which was disclosed in March. Closing of the transaction is anticipated in January 2015.

Haggen, Inc. of Bellingham, Washington would acquire most of the stores set to be divested. The company, which currently operates just 18 stores in Washington and Oregon, would acquire 146 stores in Arizona, California, Nevada, Oregon, and Washington. The proposed acquisition would be a significant expansion for Haggen. The chain has shed a number of stores since Comvest Partners, a private investment firm, acquired a majority interest in the company in 2011. At that time, Haggen operated 30 supermarkets.

The sale of the 146 stores to Haggen is conditioned on FTC approval. The agency must decide whether Haggen will be able to effectively compete with much larger rivals, including a merged Albertsons/Safeway and Kroger Co.

The remaining 22 stores to be divested would be sold to three other chains. Salt Lake City-based Associated Food Stores, Inc. would purchase eight stores in Montana and Wyoming. Twelve stores in the Dallas–Ft. Worth area would be acquired by Minyard Food Stores, which is owned and operated by RLS Supermarkets, LLC and supported by grocery cooperative Associated Wholesale Grocers, Inc. Minnesota-based SUPERVALU Inc. agreed to acquire two Albertson's grocery stores located in Everett and Woodinville, Washington.

In addition, SUPERVALU reports that it has agreed to serve as Haggen’s grocery supplier to 64 Haggen stores in Oregon and Washington and as the transition services provider for all 164 Haggen stores under the proposed agreement with Albertsons/Safeway. These deals also are conditioned on FTC approval.

“We're pleased to have found strong buyers for these stores and to have completed this important step toward combining Albertsons and Safeway,” said Safeway President and Chief Executive Officer Robert Edwards, in announcing the proposed divestitures. “We look forward now to the transaction's close, so we can begin working together to enhance the loyalty of grocery shoppers by delivering high quality products, great service and lower prices to become the favorite local supermarket in every neighborhood we serve.” Edwards is set to become President and Chief Executive Officer of the combined company.

Earlier store sales. Before the merger agreement was announced, Safeway in October 2013 decided to shutter its Dominick's stores in the Chicago market, where Albertson's has a strong presence with its Jewel-Osco unit. Some of the Dominick's stores were sold to existing rivals, such as Albertson's Jewel-Osco, and newer entrants, including Roundy's, Inc. However, some of the Dominick's units remain vacant a year after their closures.

AB Acquisition LLC, the owner of Albertson’s LLC, is controlled by a Cerberus Capital Management, L.P.-led investor group. It operates more than 1,000 stores under the Albertsons, ACME, Jewel-Osco, Lucky, Shaw’s, and Star Market banners, among others in 29 states. Safeway Inc. operates approximately 1,300 stores under the Safeway, Vons, Pavilions, Randalls, Tom Thumb, and Carrs names in 20 states.

Companies: AB Acquisition LLC; Albertson’s LLC; Safeway Inc.; Haggen, Inc.; Associated Food Stores, Inc.; Associated Wholesale Grocers, Inc. ; RLS Supermarkets, LLC; SUPERVALU Inc.; Roundy's, Inc.

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