The state claimed victory in its fight to maintain competition at the grocery counter after California's largest supermarket chain agreed to sell most of its Alpha Beta stores to settle antitrust charges.
Wednesday's decision by American Stores Co. headquartered in Salt Lake City ended a 1 1/2-year legal battle with California authorities over its $2.5 billion acquisition of the Lucky supermarket chain.It also follows a key U.S. Supreme Court ruling last month that allowed the state to sue the company to overturn the merger. Previously, it had been widely assumed that states and citizens could not interfere with deals once they were completed.
American Stores did not admit that the takeover was anti-competitive and said it agreed to the settlement to avoid any more costly legal battles.
"It is evident the time required and disruption caused by further litigation with the attorney general would only serve to create great confusion and uncertainty for employees, shareholders and lenders," said J.L. Scott, chief executive of American Stores.
Attorney General John Van de Kamp, who had contended the merger would hurt competition in the supermarket business, hailed the agreement.
"This is wonderful news for California consumers struggling to stretch their grocery dollar," said Van de Kamp.
Under the terms of a consent decree, American Stores will continue to operate Lucky but, within the next five years, must sell 152 of Alpha Beta's 175 stores in Southern California. It also will convert nine Alpha Betas into Lucky stores and sell nine Lucky stores.
Van de Kamp said American's operation of the remaining 14 Alpha Beta stores would not hurt competition.
The deal only affects Alpha Beta stores in Southern California. In an earlier deal between American Stores and the state, American Stores agreed to sell 13 of Alpha Beta's Northern California stores and integrate the other 23 into Lucky's chain.
The chain closed all eight of its Utah grocery stores in December - a move which put displaced nearly 1,200 employees. Smith's has leased seven of the stores and the eighth, located in Centerville, was purchased by Albertson's.
American Stores also agreed to pay $550,000 to the Attorney General's office to cover a portion of the attorneys fees and other costs.
The agreement was approved by U.S. District Judge David W. Kenyon in Los Angeles, who would have presided over a trial.
The deal puts no restrictions on American Store's future growth in California and doesn't require the attorney general to approve of the buyer, price or terms of the sale of the stores.
Scott said American Stores expected to receive full value for the Alpha Beta stores. In 1989, the 161 stores subject to divesture earned $32.5 million on sales of $1.8 billion.
American Stores completed the purchase of Dublin, Calif.-based Lucky Stores Inc. in May 1988 to create the state's largest grocery store chain with more than 500 stores and annual sales of more than $20 billion.
Four months later, Van de Kamp sued to block the merger on grounds it was anti-competitive. American had contended the deal would ultimately help consumers because Alpha Beta stores would adopt Lucky's low-price policies.
But a federal court forbade the joint operation of Lucky and Alpha Beta until the matter could be resolved in court.
In April, the U.S. Supreme Court voted 9-0 to empower Van de Kamp to sue to undo the merger.