FTC Backs Vons-Safeway Deal but Insists on Sale of 12 Stores

Vons Cos. won preliminary approval Friday from the Federal Trade Commission to proceed with its $408-million acquisition of 172 Southern California Safeway stores, with the proviso that it must sell 12 locations to satisfy concerns about competition.

Under the agency’s order, the public has 30 days to comment on the merger before the commission takes a final vote. Vons, based in El Monte, said it expects the takeover to be completed after a shareholder vote in late August.

Vons Chairman Roger E. Stangeland said Safeway shoppers should benefit from Vons’ lower prices. “There are something over a couple of million people who shop Safeway every week, and we estimate we will lower their food bills by something in excess of $1 million a week,” he said. On a less cosmic level, that means each shopper could expect to save about 50 cents a week.

Vons’ planned takeover of Safeway’s Southern California operations, originally announced last December, will result in the elimination of another name from the highly competitive Los Angeles-area grocery business.

The combination will give Vons about $5 billion in annual sales and, at the outset, nearly 360 stores and make it the largest Southland chain, at least for the time being. Two rivals--Lucky, with 180 Southland stores, and Alpha Beta, with about 190--recently announced plans to merge, with the Alpha Beta banner being eliminated in favor of Lucky’s. Supermarket industry observers anticipate that the FTC might require the sale of between 30 and 65 stores in that deal.

Ron Rotter, an analyst with Morgan, Olmstead, Kennedy & Gardner, a Los Angeles brokerage, said the ruling indicates that Vons, which now has 193 stores, “had to give up very little to placate the FTC. I would imagine they’re ecstatic.”

To satisfy FTC concerns, Vons said it plans to sell three Vons and nine Safeway stores. The three Vons are in Barstow at 1308 E. Main St.; in Palm Springs at 1733 E. Palm Canyon Dr. and in Santa Barbara at 17 S. Milpas.

The nine Safeways are in Santa Clarita at 19331 Soledad Canyon Road; in Yucca Valley at 57200 29 Palms; in Camarillo at 674 Las Posas Road; in Ocean Beach at 4949 Santa Monica Ave.; in Chula Vista at 2909 Coronado Ave.; in Santa Barbara at 222 N. Milpas St.; in Claremont at 6936 Linda Vista Road; in Paradise Hills at 3011 Alta View Dr. and in North Park at 3030 Grape St.

Under the FTC order, the stores may be sold to any of the following supermarket operators: Albertsons, Big Bear, Certified Grocers of California, Hughes (except the Santa Clarita store), Ralphs Grocery (except the Camarillo store) or Stater Bros. (except the Barstow and Yucca Valley stores).

Stangeland said Vons plans to remodel and update all the Safeway stores over the next few years, with the per-store cost ranging from $40,000 to $3 million or more, depending on the size and how drastic a renovation is needed.

He added that the “overwhelming number” of Safeways will be converted to Vons supermarkets, with roughly between 7 and 15 being revamped as Pavilions and fewer than 10 becoming Tianguis stores.

Initially, Vons noted, no layoffs are planned as a result of the merger. Once the 12 stores are sold, however, some layoffs will undoubtedly occur, although the company expects that the other companies that buy the stores will hire some of the workers.

Stangeland said the acquisition will not change Vons’ current level of debt; its debt is now 78% as great as the company’s net worth.

Having waited six months for this decision, Stangeland plans a holiday weekend at the 375-acre walnut ranch he bought recently in the Santa Ynez Valley. But it also will be a bit of a “busman’s holiday,” he noted, since he’ll visit some remodeled stores along the way.