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How would Albertsons swallow up Haggen?

This map shows all of the stores under the Albertsons umbrella as of August 2015, after a merger with Safeway was approved.
This map shows all of the stores under the Albertsons umbrella as of August 2015, after a merger with Safeway was approved. The Idaho Statesman

It’s been a complicated, busy year for Albertsons when it comes to buying and selling stores, but it’s clear that the company has become more dominant in the grocery industry.

The potential acquisition of Haggen’s core stores is just the latest maneuver by Albertsons, which is based in Boise, Idaho and controlled by an investor group led by Cerberus Capital Management. The grocer has more than 2,200 stores with 18 different banner names, including Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb and United Supermarkets.

The biggest recent deal for the company was the merger with Safeway, which was completed last year and resulted in Albertsons gaining more than 1,000 stores. In order to get the Safeway acquisition approved by the Federal Trade Commission, Albertsons had to shed 168 stores to maintain competitive markets in some communities.

The FTC believes that it is best for consumers if these stores continue to operate as supermarkets, even if Albertsons owns them.

Betsy Lordan, FTC Office of Public Affairs

To accomplish that, Albertsons sold 146 stores to Haggen and 22 to other companies.

It was a bold move for Haggen, which grew virtually overnight from 18 stores and 16 pharmacies to 164 stores and 106 pharmacies, expanding from the Northwest into California, Arizona and Nevada. But the Bellingham-based grocer struggled to convert the stores it had purchased and in less than a year declared Chapter 11 bankruptcy on Sept. 8, 2015.

Albertsons bought 33 of Haggen’s stores in a November auction. If Albertons buys Haggen’s 32 core stores — something one union local representing Haggen workers said is in the works — it will not have shed as many stores as the FTC had required in the merger with Safeway.

How could this happen?

From the FTC’s standpoint, having Albertsons take back stores it was originally supposed to shed is preferable to having empty storefronts. The federal agency is not involved in the bankruptcy proceedings but does receive advance notice of any acquisitions (or reacquisitions) of supermarkets by Albertsons in these markets.

“The FTC believes that it is best for consumers if these stores continue to operate as supermarkets, even if Albertsons owns them,” said Betsy Lordan, who works in the FTC Office of Public Affairs, in a written statement. She pointed out that a number of competitors also purchased stores in that November auction of non-core stores. The competitors that bought store locations in the non-core auction include Gelson’s and Smart & Final.

Lordan said that given the bankruptcy is ongoing, the FTC wouldn’t comment further at this time.

David Livingston, owner of DJL, a supermarket location research company in Milwaukee, said every FTC-forced divestiture (or shedding of stores) is similar: Companies that shed stores aren’t hoping those stores succeed.

What happens next?

If Haggen is finalizing an agreement to sell its core stores to Albertsons, it probably will happen soon.

Haggen’s auction of the 32 remaining stores has been moved from Friday, March 11 to March 18, according to U.S. Bankruptcy court documents. Albertsons has not commented about any potential deal to buy the Haggen core stores, but it appears it has several options if it happens, including changing the stores to one or more of the Albertsons brands.

Albertsons already has announced plans to close its lone Albertsons store in Whatcom County, at 1650 Birchwood Ave. The company plans to close that store on Saturday, May 7. According to Whatcom County property records, Albertsons owns that space, which has about 30,000 square feet of floor area.

Dave Gallagher: 360-715-2269, @BhamHeraldBiz

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