EASTON, Pa. -- The future of Laneco here, a 19-store subsidiary of Supervalu, Minneapolis, could be determined by an arbitration ruling expected this week.
Giant Food Stores, Carlisle, Pa., an Ahold operating company, told SN last week that it has reached preliminary agreement to buy some of the Laneco stores.
However, United Food and Commercial Workers Union Local 1776, Plymouth Meeting, Pa., has sought an injunction to block any sale of the stores that does not require a purchaser to be bound by the union's contract with Laneco, which has another two-and-a-half years to run.
An arbitration hearing was held last week, at which the union argued its case and Supervalu maintained that there is no successor clause in the Laneco contract. Both the company and the union told SN they expect a ruling in the case early this week.
Meanwhile, John Ward, a Supervalu spokesman, told SN that all the Laneco stores, which are in Pennsylvania and New Jersey, have been closed since July 21.
Ward also told SN that Supervalu had negotiated cash payments with two unions that the company said did have successor clauses in their contracts -- another UFCW local that represented the stores' meat cutters and a Teamsters local.
According to Wendell Young 3rd, Local 1776 president, the union maintained at the hearing that any Laneco purchaser would be obligated to "hire the people [who had worked in the stores] and honor the contract." He told SN, "We made a very good case, but anything can happen with these decisions."
Young said the union has not had any direct talks with Giant about hiring or employment practices at the store should the sale go through.
Denny Hopkins, Giant vice president of marketing and advertising, told SN, "We have reached a preliminary agreement to purchase several Laneco facilities in northeast Pennsylvania, but, because the matter is in arbitration, we are not prepared to comment on specific sites or the number of locations in the preliminary agreement."
George Dahlman, food & distribution analyst, U.S. Bancorp Piper Jaffray, Minneapolis, told SN that if the arbitrator ruled that a purchase would have to honor the contract, "that would probably not be a deal-breaker."
He added, "Anybody going into this would have already looked into it on his own."
The Federal Trade Commission could also block Giant's acquisition of the stores, noted Jonathan Ziegler, San Francisco-based managing director at Deutsche Banc Alex. Brown, New York.
According to a local newspaper, Giant, with eight stores, held a 17.7% share of the Allentown-Bethlehem-Easton market in 2000. Laneco, the paper reported, was No. 2, with 12 stores and a 15.1% share.
"Ahold is going to tread very cautiously," he told SN, a reference to the regulatory scrutiny that led Giant's corporate parent to drop its effort to acquire Pathmark Stores in late 1999.
However, Ziegler added, "There's a new [presidential] administration, and the situation at the FTC is very fluid."
The Laneco stores were getting produce from an 83,500-square-foot distribution center in Norristown, Pa., which Supervalu said is scheduled to close Sept. 9, with approximately 180 people being laid off.
Although the facility was serving other, independent customers, the Laneco stores represented "a significant percentage" of Norristown's business, a spokeswoman told SN. However, besides losing that business, the facility was old and its lease was scheduled to expire, she said.
Produce distribution from Norristown will shift to Supervalu's 600,000-square-foot perishables warehouse in Perryman, Md.
In late May, Supervalu announced it would close the 19 Laneco stores, part of a group of 30 underperforming locations the company said it would shut down to focus capital spending in markets with high growth potential.