BELLINGHAM — Albertsons outbid competitors for the right to buy 33 grocery stores from bankrupt Haggen in an auction this week in Los Angeles. Among them were stores in Everett and Monroe. But an agreement between Albertsons and the Federal Trade Commission seems to cast doubt on whether the grocery giant will be able to go through with the purchase.
The Boise-based grocery chain, now a giant after its $9.2 billion acquisition of Safeway earlier this year, won the right to buy back 12 of 13 Washington stores that were auctioned by Haggen, an upscale grocery and drug chain based in Bellingham. In the wake of its sudden collapse, Haggen has auctioned 55 stores in all in Washington, Oregon, Nevada, California and Arizona, according to documents filed in U.S. Bankruptcy Court in Delaware.
All of the 33 stores that Albertsons won at auction this week used to be either an Albertsons or a Safeway. Albertsons had sold them only months ago to Haggen to satisfy FTC anti-trust concerns, to clear the way for the Safeway acquisition.
Albertsons plans to convert the Everett Haggen store, at 7601 Evergreen Way, back to its original Safeway brand and return the Monroe store, at 19881 U.S. 2, to the Albertsons brand.
In all, Haggen bought 146 Albertsons and Safeway stores in western states but started losing money at nearly all of them within months. Haggen filed for Chapter 11 bankruptcy on Sept. 8, and this week’s auctions were part of the ongoing bankruptcy process.
The purchase of the stores is far from final, and the FTC seems obligated to scrutinize the deal. Unless market conditions have changed in the areas where the FTC ordered Albertsons to divest stores, it seems the purchases would still result in an anti-competitive situation.
“For a period of 10 years, Albertsons is required to give the commission prior notice of plans to acquire any interest in a supermarket that has operated or is operating in the counties included in the relevant markets,” reads a proposed agreement between Cerberus Capital Management, the private equity owner of Albertsons, and the FTC, published in the Federal Register on Feb. 3.
The FTC wouldn’t comment on whether it would need to review or approve Albertsons’ purchases. An Albertsons spokesperson didn’t respond to a request for comment.
Two of the stores that Albertsons wants to buy from Haggen have back-up bidders: Regency Centers, a commercial real estate developer, is listed as the back-up bidder on the Haggen store in Everett. Peckham Properties Inc., also a commercial real estate developer, is the back-up bidder on a La Mesa, California, store. The other 31 stores sought by Albertsons don’t have back-up bidders.
The United Food and Commercial Workers union, which represents the majority of Haggen employees, announced its support for Albertsons in a press release on Nov. 13. The union also represents Albertsons employees.
“We look forward to working with Albertsons to ensure that these stores are a success, and that the hard-working men and women are able to continue serving their communities and earning the wages and benefits they deserve,” the union said in a statement. “For stores that were sold to other employers, we are actively seeking opportunities to negotiate with new owners so that we can quickly secure jobs and peace of mind for our hard-working members.”
In a statement issued Friday, the union said: “We continue to closely monitor this process and will know more early next week about what the outcome will look like as there are extra steps after the bidding and prior to an approved sale. Also, we hope there may be positive news about the other stores that had been auctioned but had no bid.”
Ninety-five closing Haggen stores were to be included in this week’s auction, according to court filings. Of those, 55 received bids.
Besides the conversion in Monroe, Albertsons plans to convert Haggen stores in Milton, Puyallup, Renton and Burien to the Albertsons brand. Besides the one in Everett, Haggen stores in Gig Harbor, Spanaway, Port Orchard, Shoreline and Renton would be converted to Safeway.
Court documents didn’t include prices for the auctioned stores.
Interested parties have until Thursday to object to the proposed sales. A sale hearing is scheduled for Nov. 24.
This week’s auction’s didn’t include any of Haggen’s Whatcom County locations. Those are scheduled to be auctioned Jan. 8.
The Herald staff contributed.
Timeline of Haggen’s demise
The demise of Haggen, the Bellingham-based premium grocery chain with seven stores in Snohomish County, began with the acquisition of Safeway Inc. by Boise-based Albertsons, a deal announced in March 2014.
December 2014: Haggen, with 18 grocery stores and 16 pharmacies in Washington and Oregon, announces it will buy 164 Safeway and Albertsons stores in Washington, Oregon, California, Nevada and Arizona. The value of the deal is later put at $300 million. The Federal Trade Commission had required the stores’ divestiture as a condition of the $9.2 billion Albertsons-Safeway merger because the deal otherwise would likely lead to anti-competitive conditions in certain markets.
January 2015: The Albertsons acquisition of Safeway is complete.
February: Haggen takes control of the 146 stores and begins to re-brand them.
June: Haggen complains to Albertsons that the seller has not met training and technological obligations.
July: Albertsons sues Haggen for $40 million, saying Haggen failed to pay for inventory. Haggen begins cutting worker hours and lays hundreds off.
August: Haggen announces it will sell 27 stores, most of them acquired in the deal with Albertsons — in California, Arizona, Nevada, Oregon and Washington.
September: Haggen sues Albertsons for $1 billion, alleging it was deceived and that Albertson sabotaged the transition of the stores’ ownership. Haggen also files for bankruptcy and announces that it will sell about 100 more stores, including locations in Everett and Monroe which it acquired from Albertsons.
October: Haggen finds a buyer for 36 stores in the Southwest. It later says it intends to sell six more stores in Washington and Oregon.
November: Haggen seeks permission from federal regulators to sell even its “core stores” — 37 successful Northwest locations around which the bankrupt company had previously planned to reorganize. Albertsons wins the right to buy 12 stores, including the Everett and Monroe locations. The Everett store would revert to the Safeway brand and the Monroe store would become an Albertsons again.
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