Albertson’s, Lucky look at forced sale

Wednesday, June 16, 1999 | 10:56 a.m.

The Albertson's supermarket chain is expected to learn by the end of the month if it will have to sell any of its Las Vegas stores when it buys the company that owns Lucky grocery stores.

Industry experts expect the Federal Trade Commission will require the company to divest stores when it buys American Stores Co., which owns Lucky and the Sav-on drugstore chain.

The $8.3 billion acquisition was announced last summer and shareholders for both companies approved it in November. The deal would form the nation's largest supermarket chain.

Albertson's intends to retain both companies' current store names, although some individual store names may change.

The FTC is in the midst of its investigation into whether Albertson's would have to sell any of its 20 local stores or the 26 Lucky stores it would acquire in the Southern Nevada market.

Experts familiar with the Albertson's deal and with FTC procedure say it's likely the company will have to sell stores in markets where it will own multiple brands, such as Lucky and Albertson's in Las Vegas. Similar circumstances exist for the company in California and New Mexico.

"We expect to close the merger by the end of the month," said Mike Read, a spokesman for Boise, Idaho-based Albertson's.

But Read had no comment on what options the company is considering if the FTC orders Albertson's to divest stores in the interest of competition.

The FTC's Bureau of Competition has analyzed the supermarket industry and determined that it would take action to balance competition in any community in which four or fewer companies operate.

In Las Vegas, Smith's and PriceRite are operated by the Kroger Co., which last month received FTC approval in its acquisition of Fred Meyer Inc. Vons Cos. is owned by Safeway Inc. and Albertson's and American Stores round out the chain competitors in the area.

An FTC spokesman said even though Albertson's plans to retain the names of individual stores, the federal agency is looking at Albertson's and Lucky as one entity.

The FTC won't disclose how -- or even if -- Albertson's will have to divest holdings in Las Vegas. But experts who follow the industry say Albertson's will have to sell stores here and one of these scenarios could occur:

Albertson's could be directed to sell all of one brand store or another. That means the company could sell off the Lucky stores to a new competitor. In all likelihood, that would mean the Lucky brand name would disappear in Las Vegas.

The more likely possibility is that Albertson's would keep the Lucky name and divest its Albertson's stores. The reason: Albertson's decided to acquire American Stores because of its strength in the California market.

By keeping the Lucky name in California and Nevada, Albertson's would beef up a market it covets. Ironically, that would remove the brand name of the company's namesake in Las Vegas.

Albertson's could be directed to sell a combination of stores in the market. That recently occurred in Wyoming, where Albertson's acquired Buttrey Food & Drug Stores Co. Buttrey owned 44 stores in Montana, North Dakota and Wyoming and the FTC ordered Albertson's to divest nine Buttrey stores and six Albertson's.

Who would buy the stores Albertson's would cast off? Industry experts have pointed to three prospects.

Furr's Supermarkets, Albuquerque, N.M.; Raley's Supermarkets, Sacramento, Calif.; and Scolari's Food & Drug Centers, Sparks; were named as companies with a potential interest in entering the Las Vegas market, said a story in Supermarket News, a trade publication.

"Furr's has been and is interested, certainly, in Las Vegas," said Buzz Doyle, president of Furr's. "However, all that is in the hands of the Federal Trade Commission and Albertson's as far as I know."

Representatives of Raley's and Scolari's could not be reached for comment.

Elliot Zwiebach, who wrote about the Albertson's acquisition in Supermarket News, said Furr's could be a front-runner in the process if Albertson's decides to sell its Nevada and New Mexico stores as a package. Furr's has the desire to enter the Las Vegas market and has holdings in New Mexico.

While Raley's and Scolari's may be interested in Southern Nevada, they haven't expressed any desire to move into New Mexico.

Albertson's acquisition of American Stores would cap a major buying binge by the company. In filings with the Securities and Exchange Commission, Albertson's said the merger would double the size of the company.

American Stores operates 1,580 stores, including 773 free-standing drug stores.

As of June 2, Albertson's operated 995 stores and 11 distribution centers nationwide with 100,000 employees. It has 31 stores in Nevada, including 20 in Southern Nevada, which are a part of the company's Southern California Division.

American Stores would become a wholly owned subsidiary of the company if the deal is approved.

Last year, Albertson's put these companies in its shopping cart:

Seessel Holdings. The operator of 10 Seesel's grocery stores in Memphis, Tenn., was acquired Jan. 30.

Smitty's Super Markets Inc. The company owned 10 stores and three gasoline stations in southwest Missouri. The deal closed April 20.

Bruno's Inc. The company had 14 stores and one under construction when it was acquired Aug. 24. Stores are located in Nashville and Chattanooga, Tenn., and one in northern Georgia.

Buttrey Food & Drug Stores Co. The Oct. 1 deal was for 44 stores in Montana, North Dakota and Wyoming, but 15 stores were divested.