Merger Expected to be Completed Wednesday
BOISE, Idaho, June 22 /PRNewswire/ -- Albertson's, Inc. (NYSE: ABS) and
American Stores Company (NYSE: ASC) announced today that the companies have
reached an agreement with the Federal Trade Commission allowing the
consummation of their pending merger. In addition, the companies have entered
into agreements with the Attorneys General of California, Nevada and New
Mexico. The agreements with the three states include provisions substantially
identical to those in the agreement with the Federal Trade Commission. The
companies expect to close the transaction effective at 11:59 p.m. New York
City time on Wednesday, June 23, 1999.
The agreements require Albertson's to divest a total of 117 stores in
California, 19 stores in Nevada and 9 stores in New Mexico. Of the stores
required to be divested, 40 are American Stores locations operated primarily
under the Lucky name, and 105 are Albertson's stores operated primarily under
the Albertson's name. In addition the companies will divest four supermarket
real estate sites as required by the agreements.
Albertson's has signed agreements to sell 31 stores to Certified Grocers
of California, Ltd.; 27 stores to Raley's Inc.; 40 stores and 2 store sites to
Ralphs Grocery Company; 43 stores and 1 store site to Stater Bros. Markets and
4 stores and 1 store site to The Vons Companies, Inc. All but two of the
stores are required to be divested over the next four months. The aggregate
gross annual sales for the fiscal year ended in January 1999, of the stores
required to be divested were $2.3 billion.
Gary Michael, chairman of the board and chief executive officer of
Albertson's, said, "We are extremely pleased to be moving forward with the
final steps required to complete the merger. The new combined company creates
many benefits for our customers, employees, suppliers, stockholders and the
communities in which we operate. This merger makes tremendous financial and
strategic sense for Albertson's.
"Strategically, this merger creates a nationwide retailer with retail food
and drug stores located throughout 38 states. It strengthens our position in
existing markets such as California and it gives us a strong market presence
in important urban markets such as Chicago and Philadelphia. Additionally,
the over 780 stand-alone drugstores provide a new vehicle for growth that will
help us take advantage of the promising opportunities in the pharmacy
business.
"Our growth story will extend beyond the merger with our continued
aggressive expansion program. The combined company plans to spend
approximately $11 billion over the next five years on capital expenditures
that are projected to add approximately 750 retail food and drug stores,
500 drugstores, and 600 fuel centers and to remodel approximately 730 stores.
"Financially, we believe that this merger will be accretive to earnings
per share in fiscal year 2000, excluding merger related costs. While the
number of divestitures was more than we had hoped for, it is certainly
manageable. Based on the results of the integration planning process and the
required store divestitures, we believe the synergies are greater than the
original estimate of $100 million in the first 12 months, $200 million in the
second full year and $300 million per year thereafter. We expect to realize
these substantial synergies through a combination of cost reductions, enhanced
purchasing ability and efficiencies from increased volumes in our existing
markets. The Company plans to streamline operations by adopting common
systems and 'best practices' in all areas. Any additional savings may be used
to drive comparable store sales which will help increase earnings in the
future," said Mr. Michael.
The transaction is intended to be accounted for as a pooling of interests,
and Albertson's currently expects after-tax merger related costs of
approximately $700 million. A significant portion of these costs will be
recognized as a non-recurring restructuring charge in the second quarter of
fiscal 1999, with the remaining costs recognized as either period costs or
restructuring charges as incurred over the next two years. The cash portion
of these charges is estimated at approximately $300 million. When offset by
the cash received from the sale of the stores required to be divested and the
net proceeds from the sale of assets that will not be used in the combined
company, the net positive cash flow is approximately $300 million. The
Company anticipates that the net positive cash flow will be used to reduce
debt over the next two years.
"Our business is a people business -- from employees and customers to
suppliers -- and this merger will provide more opportunities for employees and
suppliers. This merger will allow us to meet the grocery, general merchandise
and pharmacy needs of more customers. We are pleased to welcome the well-
trained, motivated and loyal employees of American Stores. While we are
disappointed that the process of divesting stores will cause the loss of
valued employees, we are pleased that nearly all of their jobs will be
maintained by the retailers who are buying our stores," said Mr. Michael.
Albertson's also announced that Dick King, president and chief operating
officer, has resigned his position with the Company and his membership on the
Board of Directors to pursue other opportunities. "We are disappointed that
Dick is leaving, however we have great bench strength ready to step up," said
Mr. Michael. The new Office of the Chairman will include Mr. Michael; Michael
Reuling, vice chairman; Carl Pennington, executive vice president, marketing;
and Thomas Saldin, executive vice president and general counsel. In addition,
Peter Lynch, general manager of American Stores' Acme Markets will be promoted
to executive vice president of operations, and Robert Butler, vice president
of Albertson's Southern California Division, will be named senior vice
president of merchandising. Mr. Lynch and David Simonson, executive vice
president of operations, will each be responsible for half of the Company's
eight operating regions, while Mr. Butler will report to Carl Pennington.
Both Albertson's and American Stores are among the largest retail food and
drug operators in the United States. Albertson's, which is based in Boise,
Idaho, currently operates 997 retail stores in 25 Western, Midwestern and
Southern states. American Stores, based in Salt Lake City, Utah, currently
operates approximately 1,585 stores in 26 Western, Midwestern and Eastern
states. Following the merger and required divestiture of stores, Albertson's
will operate more than 2,400 stores in 38 states.
This press release contains certain forward-looking statements about the
ability of the Company and American Stores to satisfy the conditions to
closing of the merger transaction and with respect to the future performance
of the combined companies. These statements are based on management's
assumptions and beliefs in light of the information currently available to it.
The Company assumes no obligation to update the information contained herein.
These forward-looking statements are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements including, but not limited to, the ability of the Company and
American Stores to close the merger transaction; material adverse changes in
the business or financial condition of either company prior to closing of the
merger transaction; the Company's ability to successfully integrate the
operations of American Stores, and other factors affecting the respective
businesses of the Company and American Stores which are described in the Joint
Proxy Statement and Prospectus and their respective Forms 10-Q filed with the
Securities and Exchange Commission.
SOURCE American Stores Company
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Company News On-Call:
http://www.prnewswire.com/comp/048750.html or fax,
800-758-5804, ext. 048750
CONTACT:
Investor Relations: A. Craig Olson,
208-395-6284, or Renee Bergquist, 208-395-6622; or News Media:
Mike Read or Jenny Enochson, 208-395-6392, all of Albertson's,
Inc.; or Investor Relations for American Stores Company,
801-961-4525
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