DEBARTOLO SEEN DELAYING NEGOTIATIONS TO SELL RALPH'S

ELLIOT ZWIEBACH

COMPTON, Calif. -- Although negotiations for the sale of Ralphs Grocery Co. to Food 4 Less Supermarkets, La Habra, Calif., were reportedly continuing, it was not clear last week when a deal might be forthcoming, SN sources said.

Despite reports that a deal may be imminent, observers said there is at least one major sticking point.

Executives of Ralphs and Yucaipa Cos., the parent company of Food 4 Less, were not available for comment last week.

The sticking point in negotiations apparently lies with Edward J. DeBartolo, chairman of the Youngstown, Ohio-based development company that bears his name. DeBartolo Corp. owns slightly more than 60% of Ralphs.

According to one observer: "He's trying to decide whether to sell the chain to a single buyer like Food 4 Less or auction it off piecemeal. There's also some consideration being given to the real estate value of Ralphs and whether to sell that separate from the stores."

Ralphs, which has been in business for more than 100 years, owns many of the properties on which its stores sit, including many locations in which real estate is no longer available for sale.

Other observers agreed that DeBartolo controls the timing of any sale of Ralphs, "but it's important for him to get rid of Ralphs to liquefy his assets," one local source said.

Consequently, some observers said that gives DeBartolo an incentive for closing a deal.

A spokesman for the DeBartolo Corp. could not be reached for comment last week. In comments to SN in February, Byron Allumbaugh, Ralphs chairman and chief executive officer, said the DeBartolo Corp. "has never pretended to have a long-term interest in maintaining its Ralphs investment."

Ralphs' other equity investors, which include two Canadian banks, a Canadian real estate company and Federated Department Stores, Cincinnati, Ralphs' former parent company, are also intermediate owners, Allumbaugh said at the time.

DeBartolo and Yucaipa have reportedly been in discussions for nearly a year, sources said.

Ralphs operates 165 stores in southern California. Food 4 Less operates 251 stores in California and the Midwest, including 134 Alpha Betas, 24 Boys Markets, 21 Food 4 Less warehouse stores and 20 Viva Mercados in southern California; 10 Cala Foods, 10 Bell Markets and four Foods Co. warehouse stores in northern California, and 23 Food 4 Less and five Falley's in Kansas and Missouri.

The combination of 199 Food 4 Less stores in southern California and 165 Ralphs stores would give Food 4 Less 364 stores here -- which will give it more units than Vons Cos., Arcadia, which will operate 333 stores after it closes nine units this month.

However, the combination of Ralphs' $2.73 billion volume with the estimated $2.2 billion Food 4 Less does in Southern California would give the combined operation sales of $4.93 billion, just below Vons' $5.1 billion

If Yucaipa is successful in acquiring Ralphs, industry sources said, the following events are likely to occur:

· Some of the larger, higher volume Alpha Betas would be converted to the Ralphs banner.

· Allumbaugh would be named to oversee the entire Food 4 Less Supermarkets operation.

· Al Marasca, president and chief operating officer of Ralphs, would oversee the expanded Ralphs operation, while George Golleher, president and chief operating officer of Food 4 Less, would oversee the balance of the chain's operations in California and the Midwest.

Folding the better Alpha Beta units into Ralphs would eliminate Alpha Beta as a major factor in Southern California, observers told SN, making competitive life tougher here.