|In a declining highly competitive market. I expect many more store closings upon a successful completion. Like Kodak (non union), I can only imagine what pension liability might be for this mature, highly unionized, industry. IMO it might take a long time to complete ( FTC). IMO the reward of a higher bid will likely result in very little appreciation for the risk taken.|
How will sale of Safeway affect prices, employees?
By Rachel Raskin-Zrihen Times-Herald staff writer and By Heather Somerville MediaNews Group/
Posted: 03/08/2014 01:07:20 AM PST
At least some employees at the Vallejo Safeway stores are concerned about the merger announced Thursday, of their company with Cerberus Capital Management, LP., Albertson's parent company.But, mostly, it's a fear of the unknown, said one local Safeway employee who asked not to be identified.
"People are worried. We don't know what's going on, if it's going to be shut down," the employee said. "Some people are looking for new jobs."
There are three Safeway stores in Vallejo, and one each in Benicia and American Canyon.
Jacques Loveall, president of UFCW 8-Golden State, representing 45,000 active and retired supermarket workers, told union members in a letter that the merger must still be approved by government regulators.
"We have already communicated with John Snow, the chairman of Cerberus, to begin discussions regarding the details and ramifications of the sale," Loveall said.
Loveall said the union "will be watching the progress of this proposed merger and will keep our members informed of developments as they happen."
By merging Pleasanton-based Safeway with its Boise, Idaho-based Albertsons, Cerberus hopes to cut costs, expand product selection and compete in a market Safeway and Albertsons have been steadily losing to big-box retailers, convenience stores and niche grocers.
For shoppers, the sale could mean lower prices, as executives pledge to pass cost savings, realized by combining operations like distribution, on to the consumer, although some analysts are not so confident.
For Safeway employees -- who will be negotiating a new contract with the company later this year -- jobs could be on the line, as antitrust regulations and duplication between the companies may lead to individual store sales and closures.
"As our customers need change, we have to adapt (to) a world where they have more options than ever." Albertsons' Chief Executive Officer Bob Miller, who will become executive chairman of the new supermarket conglomerate, said in a conference call with media.
But supermarket analyst David Livingston says shoppers shouldn't get their hopes up for lower prices.
"You aren't going to see them come up with any brand new ideas about how to sell groceries but you are going to see them come up with brand new ideas about how to save on expenses, and increase profits," he said.
Combined, the two supermarket chains will have about 2,400 stores, almost double the size of Safeway today, and just slightly fewer than rival Kroger's roughly 2,600 stores. The merged operation will have about a quarter million employees, 27 distribution centers and 20 manufacturing plants across the country.
Executives said there are no plans to close any Safeway or Albertsons stores, but some analysts say there will be so much redundancy that stores will inevitably close.
Safeway is the fifth-largest employer in the East Bay, with 7,400 workers, according to the East Bay Economic Development Alliance. The company has about 250 stores in Northern California, a region where it is the dominant name in the grocery business.
Frank Dell, president and chief executive of consulting group Dellmart & Co. and a 30-year industry watcher, said Safeway will likely see more changes than Albertson's which Cerberus has had at least part ownership of for about eight years.
"For the most part, Albertsons will be running the show," he said, although he added that he doesn't expect widespread Safeway store closings.
Mike Henneberry, spokesman for the labor union that represents Bay Area Safeway workers, said employees were notified Thursday but aren't panicking.
"The paychecks are going to continue to arrive," he said. "The deal hasn't been done. We'll deal with it as it comes."
The companies expect the merger to be completed in the fourth quarter, although Cerberus will need much of the year to work out antitrust issues with the Federal Trade Commission. Until then, other companies can bid for Safeway, and one grocery union official who asked not to be identified said Kroger has expressed interest.
"We got a letter from Cerebus that they will do their best to protect the interests of the workers, but there seems to be a remote possibility they may close some of the stores to improve profitability," this union official said. "Last time, when Safeway was sold a long time ago, it was a smooth process, and no one lost their jobs. But people are concerned that this investment firm might not be that friendly to workers."
Company officials could also shut stores, though there is usually some warning when such a thing happens, the union person said.
"They don't usually close stores overnight," the official said. "But with the new company.... Safeway is worth about $9 billion now, so, I doubt they'll close the stores over night. But people are definitely concerned."
P.S. I remember the A&P Chapter 11 Filing.
Grocery Operator A&P Seeks to Sell Itself Great Atlantic & Pacific Tea Co. Emerged From Bankruptcy Last Year.http://online.wsj.com/news/articles/SB10001424127887323610704578628063361723932