The Federal Trade Commission confirmed Tuesday afternoon what the news media already knew in the morning: government regulators have approved the $12.9 billion merger of supermarket giants Albertson's Inc. and American Stores Co. that will create the nation's second-largest grocery chain.

The catch: the new and much larger Albertson's that will emerge from its acquisition of American Stores will have to divest 145 stores and four future store sites to preserve supermarket competition in California, Nevada and New Mexico.Some 100,000 American Stores employees will join Albertson's during the changeover, but that will be cold comfort to the approximately 800 workers at American Stores' downtown Salt Lake City office tower who will not be joining the Albertson's team.

When American Stores began moving into its new, 25-story headquarters last June -- only two months before the merger was announced -- there were 1,850 employees scheduled to occupy the building. Albertson's spokesman Mike Read said 742 of them will join Albertson's and remain in Salt Lake City, most of them in the information technology sector.

Of the 1,850 who had been working in Salt Lake City a year ago, that number had dropped to about 1,600 earlier this year, and 415 of those have left in recent months. In addition to the 742 American Stores workers who will stay in Utah, another 115 will relocate to Boise, 50 to Scottsdale, Ariz., and another 50 to various other sites.

"So, we're talking nearly 1,000 who will have continuing jobs with the company and most still in Utah," Read said.

Those not joining Albertson's include some 60 officers, directors and managers will get 60 days' notice that they will lose their jobs. "Most of them know that's part of the process," Read said.

The disposition of the office tower has not been decided, but it's doubtful that Albertson's will have use for 610,000 square feet of office space outside its Boise headquarters. Industry watchers believe the high-rise will be sold, but if it is to be used as a multi-tenant facility, it will require extensive remodeling.

The popular American Market on the first floor of the office building will remain open "for as long as it remains profitable and as long as we can run it," Read said. "We're in the grocery store business."

The divestiture of 145 stores was the largest ever ordered by the FTC in an antitrust case involving the retail industry. By comparison, when the purchase by Kroger of Fred Meyer and Smith's Food and Drug was approved last month, Kroger had to sell only eight stores.

But the overlap between Albertson's and various American Stores operations (which include Lucky, Sav-On, Acme Markets, Jewel Food Stores and others) was too great in those three states, said the FTC, noting that without the divestitures in those markets, customers could see "price increases, and decreases in the quality and selection of food, groceries or services" due to the lack of competition.

While Albertson's has a strong Utah presence, none of the American Stores chains operate here.

The final merger agreement between the two supermarket giants will become effective at 9:59 p.m. MDT Wednesday.

The company also named the new presidents who will head the eight regions that have been set up to operate the much larger company. Denny Lucas, an Albertson's veteran, will lead the new Northwest Division from Boise that will include Utah, Washington, Oregon, Idaho and parts of Nevada.

Kevin Tripp, a Salt Lake City resident and former executive vice president and general manager of American Drug Stores, will lead Albertson's pharmacy and drug operations to be based in Scottsdale, Ariz.

The company's main headquarters will remain in Boise.

The negotiations between Albertson's and the FTC over the divestitures caused the closing of the deal to drag on some two months longer than expected. Albertson's chairman and CEO Gary Michael was clearly relieved that the haggling was over even though he has to divest as many as 100 more stores than analysts had predicted when the deal was announced last August.

The sales of the 145 stores will be completed over the next four months.

Terming the divestitures "more than we had hoped for, but certainly manageable," Michael said the merger "makes tremendous financial and strategic sense for Albertson's while strengthening our position in existing markets and giving us a strong presence in urban markets such as Chicago and Philadelphia."

Overall, the merger creates a nationwide retailer with 2,400 food and drug stores located in 38 states.

The company has agreed to divest 117 stores in California, 19 in Nevada, nine in New Mexico and four future store sites.

Most of them are currently operating under the Albertson's name or the Lucky Stores name. Buyers for the stores have already been found, including established chains such as Ralphs Grocery and Raley's Inc.

Gross annual sales for the stores to be divested totaled $2.3 billion in 1998.

View Comments

Despite the size of the American Stores acquisition, Michael said it doesn't mark the end of Albertson's growth plans. He said the company willspend $11 billion on capital expenditures over the next five years by adding 750 retail food and drug stores, 500 drugstores, 600 motor fuel centers and remodeling 730 stores.

Financially, Albertson's expects the merger to boost its earnings per share -- excluding the $700 million in after-tax merger costs -- as early as next year.

Michael said the cost savings and other efficiencies are expected to be even greater than originally forecast, with $100 million saved in the first year, $200 million in the second and $300 million annually thereafter.

Shares of Albertson's stock fell $1.56 1/2 to $54.37 1/2 at the close of trading Tuesday following the announcement. American Stores closed down 81 1/4 cents at $34.25. In early trading Wednesday, shares of both companies were down more than 6 percent.

Join the Conversation
Looking for comments?
Find comments in their new home! Click the buttons at the top or within the article to view them — or use the button below for quick access.