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Associated Foods to buy 36 Albertsons stores in Utah

Published: Wednesday, July 29 2009 12:00 a.m. MDT

Eric Wangsgaard leaves the Albertsons store on 400 East and 200 South in Salt Lake City Tuesday, July 28, 2009. Salt Lake City based Associated Food is buying 36 Utah Albertsons stores. Barton Glasser, Deseret News

Barton Glasser, Deseret News

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Salt Lake City-based Associated Foods Inc. is purchasing 36 Albertsons stores in Utah, company officials announced Tuesday.

The deal is expected to close in the late fall. The Albertsons stores will be renamed and rebranded. Associated Foods executives are winnowing down a list of potential names.

"For the most part, they are fine stores and do a good job," Associated Foods spokesman Bret Gallacher said. "And there are a few things we need to do on a store-by-store basis."

The acquisition of the Albertsons stores — which excludes two stores in Orem, two in West Jordan and three in Washington County — now means that Associated Foods will own or supply groceries to 540 stores.

In the last 10 years, Associated Foods, which is a cooperative owned by a handful of Utah grocers, began purchasing and running stores. Associated Foods owns Macey's Market, Dan's Foods and Dick's Market, as well as Lin's Marketplace in St. George. Albertsons will soon be added to that list. Other stores, such as Harmons, are members of Associated Foods but owned by the Harmon family.

Associated Foods' private label, Western Family, will replace Albertsons' private label, which is called Albertsons, as soon as the deal is complete.

The 36 Albertsons stores employ 2,700 people at the store level. "All the employees will have an opportunity to stay and work with us," Gallacher said.

Associated Foods hopes to provide a similar salary and benefits package. "We're going to look at that on a case-by-case basis, but we're anticipating the (compensation) package they receive will be very similar to one they offer."

Albertsons is owned by Minneapolis-based Supervalu Inc., which uses Supervalu affiliate Sav-On as the in-store pharmacy supplier in all its stores across the United States.

"We do not anticipate using Sav-On," Gallacher said. "Albertsons has done a good job with their pharmacies, and we're anticipating we'll be able to do the same."

No pharmacists or pharmacy technicians will lose their jobs, he said.

Supervalu estimates that the agreement, subject to government regulatory review, will generate $150 million in after-tax net proceeds. Associated Foods, a private company, has not revealed what it is paying for the stores, Gallacher said.

Gallacher would not comment on specifics about why the seven Utah Albertsons stores were not part of the acquisition. Two Utah Albertsons stores are part of a group called Albertsons LLC and were never acquired by Supervalu. The three Washington County stories are close to Las Vegas, and according to Supervalu's Web site, the company has a distribution center in Las Vegas.

As of September 2008, Smith's had 26 percent of the Utah grocery-store market, Wal-Mart had about 27 percent, Albertsons had 16 percent and Harmons had 10 percent, said grocery-industry analyst David J. Livingston.

The market share of Albertsons in Utah has been going down, Livingston said.

In 2006, Supervalu got into substantial debt to purchase Albertsons and now needs to sell its assets to raise cash.

"They borrowed like crazy to buy all these underperforming Albertsons stores," said Livingston, who said the company paid too much for Albertsons. "Supervalu is not that great of a retailer to begin with. So you had a weak retailer buy an underperforming chain of stores, and you know what the result will be. It won't be good."

e-mail: lhancock@desnews.com

TWITTER: laurahancock

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