Haggen says Gelson’s Markets and Smart & Final have made offers worth $92 million for 36 grocery stores in California and Nevada. Haggen also seeks to interest buyers in six Pacific Northwest stores it had previously said it would keep.
Two California supermarket chains have entered tentative deals to buy 36 Haggen stores in California and Nevada for a combined $92 million as the struggling Bellingham grocer draws the final curtain on its Southwest operations.
Haggen is also trying to stir up bids for an additional 96 stores — including six in Washington and Oregon that Haggen had previously said would remain part of its 37-store Pacific Northwest core.
Those six, according to court documents, are in Burien, Puyallup and Federal Way, Wash., and Happy Valley, West Linn and Eugene, Ore.
Haggen acknowledged in a statement that it has identified six stores that are being marketed both as “individual noncore stores” and also “as part of the 37 core stores” in Washington and Oregon that the company has said are successful. That means that if someone puts in a good bid, they might be spun off from the core.
Most Read Business Stories
- The tax-filing deadline was delayed, but read the fine print. You may still need to pay by April 15.
- Lawsuit over January crash of Boeing 737 alleges autothrottle malfunction
- New Amazon data shows Black, Latino and female employees are underrepresented in best-paid jobs
- A new focus at Seattle's chamber faces an old roadblock at the City Council
- In Bezos' last shareholder letter, Amazon founder commits to improving employee safety
It also signals that the entire company, including the profitable Pacific Northwest operations, might end up in another grocer’s hands at the end of the bankruptcy process.
The Southwest deals are so-called “stalking horse” agreements, meant to establish a baseline that other bidders could top. But they represent concrete hope for some of the more than 6,000 employees given notice by Haggen in its astounding pullback.
Haggen took over 146 stores from Albertsons and Safeway this yearin the wake of their $9.4 billion merger, and says it paid more than $300 million.
The two bids for Haggen stores in the Southwest are from discount grocery warehouse Smart & Final and the upscale grocer Gelson’s.
An employee at one of the San Diego-area stores sought by Smart & Final said he’s “disappointed because they’re not union.”
The worker said he makes about $20 per hour, plus health care and pension, and fears those benefits will be lost if the deal goes through. “It’s frustrating,” he said.
Smart & Final didn’t respond to a request for comment.
The majority of Haggen’s stores are being wound down, with closures expected in late November if nobody buys them.
In a memo to store employees, Haggen said it will “continue to identify buyers of stores and will share additional agreements in the coming weeks.” The company also alerted staffers that “potential buyers may visit your stores.”
Haggen said interested bidders should submit final bids by Nov. 2.
Both the auction process proposed by Haggen and any resulting sales need to be approved by the Delaware bankruptcy court overseeing the grocer’s restructuring.
If successful, Gelson’s $36 million bid for 8 Haggen stores in five California counties would be a big boost for that 18-store chain.
Encino, Calif-based Gelson’s, which was bought by private equity firm TPG last year, targeted some of Haggen’s toniest California locations. Annual household income per capita for the ZIP codes home to the eight stores averaged $93,689.
That contrasts with the average of $68,000 per ZIP code across Haggen’s entire 164-store footprint.
If another party outbids Gelson’s, the company gets a $1 million breakup fee, plus reimbursement of up to $700,000 in expenses.
Smart & Final, a chain of about 270 no-frills, discount warehouses headquartered in Los Angeles, offered $56 million in cash for 27 stores in California and one in Las Vegas. The company says it wants to convert them into a format dubbed Smart & Final Extra!, which offers more products than its typical warehouse.
Greg Conger, president of the United Food and Commercial Workers Local 324 in Southern California, said that “we are pleased to see a good union employer like Gelson’s bidding on some of the stores.” He added that Smart & Final’s “anti-union bias is very well known,” and warned it is likely to do “everything they can to not keep any of the current employees for fear of their desire to remain union.”
In a securities filing, Smart & Final said that as of December 2014 less than 2 percent of its 9,370 employees were union members.
Smart & Final is entitled to a $1.7 million breakup fee, plus reimbursable expenses of up to $1.5 million, if its bid falls through, according to court documents.
Both deals are expected to close before the end of the year.