LOS ANGELES -- The $1.5 billion merger of Ralphs Grocery Co., Compton, Calif., with Food 4 Less Supermarkets, La Habra, Calif., is scheduled to close in two days, creating a bigger, stronger entity with the potential to dominate the southern California market for years.
According to Ron Burkle, chief executive officer of Yucaipa Cos., which owns Food 4 Less, the money and stock certificates are expected to change hands and the bonds in the new company to be redeemed by about noon Wednesday. "Once all the paper is executed, the transaction will be legally complete," he told SN.
The new company, which is to be called Ralphs Grocery Co., will operate 337 stores -- 258 conventional Ralphs units and 79 Food 4 Less warehouse stores -- with combined sales of $5 billion. Yucaipa
will be the majority shareholder in the new company.
Burkle said 72% of sales, or $3.6 billion, will come from conventional stores and 28%, or $1.4 billion, will be derived from warehouse stores.
By the end of its fiscal year next January, the new Ralphs expects to open 13 more units, including six conventional stores and seven warehouse stores, Burkle said.
The new Ralphs will control a market share of about 30%, including 16% for conventional stores and 14% for warehouse stores. Those numbers compare with a share of 18.4% controlled by Vons Cos., Arcadia, Calif., and 14.3% controlled by Lucky Stores, Dublin, Calif.
Yucaipa plans to convert 116 stores from various formats to either Ralphs or Food 4 Less beginning July 1, with most of the conversions completed within three or four months, Burkle said. In addition, 23 Ralphs stores will get the Food 4 Less banner.
The company also plans to sell 27 stores to other food operators -- a prerequisite to getting approval for the merger from the California Attorney General earlier this year. Burkle said he expects those sales to fetch a total of $20 million to $40 million.
He also said Yucaipa hopes to eventually sell the 16 stores it will close, but not to other food operators.
The deal took longer to complete than anticipated.
But the delays actually have worked to the new company's advantage, Burkle pointed out, "because we've been able to do more preparation in advance of the transaction in terms of ordering equipment and making systems changes, and we've been able to convert 11 Alpha Beta, Boys and Viva units to Food 4 Less warehouse stores instead of waiting -- all of which put us further down the road than we might have been four or five months ago."
"We've been running very lean to minimize the post-merger impact on employees, and we anticipate eliminating about 250 positions at the administrative level and very few at store level over the next year."
The conversion process will involve the following changes:
Of 174 Ralphs stores, 23 will be converted to Food 4 Less (15 this year and eight more in 1996), three will be sold and one will close.
Of 52 Food 4 Less stores, 51 will retain that format and one will be sold.
Of 126 Alpha Betas, 90 will be converted to Ralphs, three to Food 4 Less, 17 will be sold and 15 will close. In addition, a single-unit drug store in Marina del Rey, Calif., called Le Drug -- which the company classifies as part of the Alpha Beta chain -- will be retained.
Of 22 Boys Markets, 16 will be converted to Ralphs, two to Food 4 Less and four will be sold.
Of six Viva stores, four will be converted to Ralphs and two will be sold.
A single unit called Marina Market will be converted to Ralphs.
As disclosed at the time the merger was announced last September, Burkle will become chairman of the new Ralphs, and Byron Allumbaugh, chairman and chief executive officer of Ralphs now, will become CEO of the new company. According to Burkle, Allumbaugh will retain that post "for at least two years, and longer if necessary."
No line of succession has been established, he added.
George Golleher, president and CEO of Food 4 Less, will become vice chairman of the new Ralphs, with oversight responsibilities for all Food 4 Less warehouse stores in southern California, northern California and the Midwest, plus real estate/construction and manufacturing.
Alfred A. Marasca, president and chief operating officer of Ralphs, will become president and chief operating officer of the new Ralphs, with responsibilities for all conventional stores, plus warehousing and distribution, marketing, personnel and labor relations and management information systems.
