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Feds approve Albertson's merger

Company and American Stores Inc. must sell 144 stores, none in Oregon

— The Associated Press

WASHINGTON -- The government gave its blessing Tuesday to a merger of Albertson's Inc. and American Stores Co. that will create the second-largest supermarket chain in the nation.

To settle antitrust concerns about overlapping markets resulting from the $12 billion deal, the two companies agreed to sell stores in the largest retail divestiture in the Federal Trade Commission's history. Under the proposed order, the two companies will be forced to sell 144 supermarkets and five planned sites.

Antitrust regulators had contended the deal would substantially reduce competition in California, Nevada and New Mexico. Attorneys general from the three states helped reach the agreement and filed consent decrees in their own federal courts.

The merger won't force Albertson's to sell any of its stores in Oregon or affect projects already underway to build stores in Medford and Central Point.

Those plans will continue, Albertson's spokeswoman Jenny Enochson said.

Albertson's, of Boise, Idaho, operates in the Midwest, West and Southern states. The Salt Lake City-based American Stores is spread across the country from Boston to California, but most of its stores are in California and Texas. The deal gives the companies a presence in 38 states and expected revenues of more than $36 billion.

Shareholders of both grocery stores approved the merger in November. It would create the nation's second largest supermarket chain after Cincinnati-based Kroger Co. Kroger merged with Oregon-based Fred Meyer earlier this year.

William J. Baer, director of the FTC's Bureau of Competition, said the agreement will ensure that consumers in those states will continue to receive the benefits of competition -- lower prices and good quality and selection -- from supermarkets in their communities.

Albertson's said it plans to complete its acquisition of American today, but acknowledged that the divestitures were greater than they had anticipated. Analysts had predicted the companies would have to sell off between 50 and 100 stores.

We clearly didn't think it was going to be quite this many, said Albertson's Vice President Mike Read. But the board of directors and the company have elected to move forward. We still think it's a tremendous deal.

The company also said the cost-savings from running the two operations together will be greater than the $300 million it initially expected to reach within three years.

It's larger than expected, no question, said Mike Shea, an analyst with D.A. Davidson & Co. in Portland, Ore., of the divestitures. But he added, I think it's a great deal long-term for Albertson's.