BOISE, Idaho, Aug. 3 /PRNewswire/ -- Albertson's, Inc. (NYSE: ABS) and
American Stores Company (NYSE: ASC) today announced that they have entered
into a definitive merger agreement in which the two companies will be
combined, forming the largest retail food and drug company in the United
States. The combined company, Albertson's, Inc., will operate more than
2,470 stores in 37 states, with pro forma 1998 estimated annual sales of
approximately $36 billion and more than 218,000 employees.
The transaction, which is expected to close in early 1999, has a total
value of approximately $11.7 billion, consisting of equity value of $8.3
billion and net debt of $3.4 billion. Excluding one-time charges, the
transaction is expected to be accretive to Albertson's earnings per share in
1999 and to accelerate Albertson's annual earnings growth in subsequent years
through the realization of approximately $300 million of annual cost savings.
Under the terms of the transaction, American Stores Company shareholders
will receive 0.63 shares of Albertson's Common Stock for each share of
American Stores Company Common Stock they own. Based upon Albertson's July
31, 1998, closing stock price of $48.00 per share, the transaction has a value
of $30.24 per share for American Stores Company shareholders. Albertson's
will issue approximately 172.8 million shares in the transaction. Following
closing of the merger, American Stores Company shareholders would own 41.3
percent of Albertson's. The companies have entered into cross options under
which each company has been granted an option to purchase up to 19.9 percent
of the other company's common stock under certain conditions.
"This transaction provides for the strategic combination of two
outstanding companies with complementary strengths and common values," said
Gary G. Michael, chairman and chief executive officer of Albertson's, Inc.
"At a time when the supermarket industry is under increasing pressure to
enhance value to customers through cost effective operations, this merger has
been designed to assist us in continuing to provide superior value and service
to our customers and compete successfully in today's marketplace.
"We expect the new Albertson's will be an industry leader, with well-known
store names and private label brands," Mr. Michael continued. "We will have a
seasoned and proven management team at both the corporate and division levels.
We will have a sound balance sheet and strong cash flow, which will enable us
to continue our combined capital spending and debt reduction programs at
current levels. In short, our potential for enhanced revenue and earnings
growth is tremendous."
Victor L. Lund, chairman and chief executive officer of American Stores
Company, said, "We are pleased to be joining forces with Albertson's, which is
one of the most admired and best managed companies in our industry. In
forming the largest food and drug retailer in the country, this transaction
will provide new opportunities for our employees, who are among the best in
the business. It will also ensure that our customers continue to receive high
quality, great value and excellent service.
"I believe that this strategic combination is in the best interests of our
employees, customers and shareholders, providing them with the opportunity to
participate in the growth of an exciting company with outstanding people and a
promising future. Because of our consistent business philosophies and similar
corporate cultures, I am confident the integration of these two companies will
go very smoothly."
The transaction was unanimously approved by the boards of directors of
both companies. The merger is subject to certain conditions, including
approval by the shareholders of both companies and regulatory approval. The
combination has been structured to be a tax-free transaction and is expected
to be accounted for as a pooling of interests.
Upon completion of the merger, Mr. Michael will continue as chairman and
CEO of Albertson's. Mr. Lund will serve as vice chairman of the combined
company. Albertson's will increase its board from 15 to 20 directors. In
addition to Mr. Lund, four other current members of the American Stores
Company board will join the Albertson's board.
Albertson's corporate headquarters will remain in Boise, Idaho.
Albertson's intends to retain both companies' current store names, although
the names of individual stores may change, depending on their size, location
and other factors.
Following the merger, Albertson's expects to record significant one-time
charges in connection with the combination. The magnitude of the one-time
charges has not yet been determined.
Both Albertson's and American Stores Company announced that they have
rescinded their respective stock buyback programs.
Mr. Michael said, "This merger will yield significant strategic and
financial benefits and is a defining milestone in our ongoing program to
accelerate sales growth, increase profitability and enhance shareholder value.
"From a strategic standpoint, this transaction will strengthen our
presence in many of our existing markets across the country -- particularly in
Northern and Southern California and the Southwest -- and enables us to enter
important urban markets like Chicago and Philadelphia for the first time.
"Additionally, we will enter the stand-alone drug store business for the
first time. By combining our fast-growing pharmacy businesses we expect to
achieve significant benefits such as improved procurement and distribution,
more efficient systems and processes, and an enhanced ability to participate
in third-party pharmacy reimbursement plans.
"Financially, we expect to achieve substantial food and drug synergies
through a combination of cost reductions, enhanced purchasing ability and
greater volumes and efficiencies in our existing markets. We expect these
annual synergies to total approximately $300 million in the third year, with
at least $100 million occurring by the end of the first year."
Albertson's expects to achieve savings of approximately $100 million from
buying and distribution efficiencies in the combined food and drug operations.
The company expects savings of approximately $200 million from a reduction of
overhead, including redundant administrative functions and information
systems, as well as a reduction of advertising expenditures in overlapping
markets. The company will streamline operations, with common systems and a
"best practices" approach in all areas.
"We are pleased to welcome the well-trained, motivated and loyal employees
of American Stores Company. Their commitment to customer service is a great
fit with Albertson's outstanding employees," Mr. Michael concluded.
Merrill Lynch & Co. served as financial advisor to Albertson's and The
Blackstone Group served as financial advisor to American Stores Company.
Fried, Frank, Harris, Shriver & Jacobson served as legal advisor to
Albertson's and Wachtell, Lipton, Rosen & Katz served as legal advisor to
American Stores Company.
American Stores Company operates 1,558 stores in 26 states including 269
food and drug combination stores, 539 supermarkets and 750 stand-alone drug
stores. Its supermarkets and combination stores operate under the "Acme
Markets," "Jewel Food Stores," and "Lucky Stores" names. Its drug stores
operate under the "Osco Drug" and "Sav-on" names.
Albertson's, Inc. is one of the largest retail food-drug chains in the
United States. The Boise, Idaho-based company currently operates 916 retail
stores in 23 Western, Midwestern and Southern states.
This news release contains certain forward-looking statements including,
among other things, statements regarding expected synergies, cost savings and
other strategic and financial benefits. These forward-looking statements are
based on current expectations, but actual results may differ materially from
those projected or suggested in such forward-looking information. The
companies do not undertake to update such forward-looking statements to
reflect actual results, changes in assumptions or changes in other factors
affecting such forward-looking information. Assumptions that could cause
actual results to differ from those set forth in the forward-looking
information include the companies' ability to successfully implement their
strategy and financial plans in connection with the merger. Additional
assumptions and other information can be found in the companies' Forms 10-Q,
filed with the Securities and Exchange Commission.
SOURCE Albertson's, Inc.
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Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 130973
CONTACT:
Investor relations: A. Craig Olson,
208-395-6284, or Renee Bergquist, 208-395-6622, both of
Albertson's, Inc.; News Media: Mike Read, or Jenny Enochson, both
of Albertson's Inc., 208-395-6392; Dan Zvonek, investor
relations/news media for American Stores Company, 801-961-4525
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