Haggen, the West Coast regional grocer, announced Tuesday that the company has filed a lawsuit against Albertsons LLC and Albertsons Holdings LLC (“Albertsons”) seeking more than $1 billion in damages.

The complaint, which was filed in United States District Court for the District of Delaware, alleged that following Haggen’s December 2014 purchase of 146 Albertsons and Safeway stores, Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.”

Albertsons sought out Haggen in order to convince the Federal Trade Commission (“FTC”) that Haggen would be a new competitor in local markets, which enabled Albertsons to gain the FTC’s approval of a merger between Albertsons and Safeway—a merger that created “one of the largest food retailers in the United States, with over 2,200 stores and $61 billion in combined sales,” according to the complaint. Despite the FTC’s orders and Albertsons’ agreement to abide by all conditions of the sale, the complaint alleges, Albertsons engaged in an illegal campaign against Haggen including “premeditated acts of unfair and anti-competitive conduct that were calculated to circumvent Albertsons obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen, all of which were intended to prevent and delay the successful entry of Haggen (or any other viable competitor) into local grocery markets that Albertsons now dominates.”

“During the transfer process, Albertsons launched its plan to gain market power and/or monopoly power, acting in a manner that was designed to (and did) hamstring Haggen’s ability to successfully operate the Stores after taking ownership,” according to the complaint.  As a result, despite Haggen’s plans to successfully operate and expand upon the acquired stores, Haggen was “forced to close 26 of the Stores that it newly acquired as a part of the Albertsons’ divestiture, and faces the potential closure of additional stores,” the complaint said.

“Albertson’s anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset,” the complaint alleged, “[and] have caused significant harm to competition, local communities, employees and consumers,” throughout California, Oregon, Washington, Nevada and Arizona.  Instead of focusing on succeeding in the new markets, according to the complaint, “Haggen has had to focus on strategies to recover from Albertsons’ wrongful acts, which include, sadly, Haggen’s efforts to find new jobs for displaced employees who too are victims of Albertsons’ actions.”

In particular, Haggen alleged in its complaint that Albertsons, in violation of numerous laws, the FTC order and the purchase agreement, intentionally and deliberately undertook a number of “malicious and unfair actions” that “strained Haggen’s resources” and “created substantial distraction and diverted the attention of store-level and senior Haggen management” during the store conversion process, such as:

• Using proprietary and confidential conversion scheduling information to plan and execute aggressive marketing campaigns intended to undermine Haggen grand openings;
• Providing Haggen with false, misleading and incomplete retail pricing data, causing Haggen stores to unknowingly inflate prices;
• Cutting off Haggen-acquired store advertising in order to decrease customer traffic;
• Timing the remodeling and rebranding of its retained stores to impair Haggen’s entry into the relevant markets;
• Diverting customers by illegally accessing Haggen’s confidential data to gain an unfair competitive advantage;
• Deliberately understocking certain inventory at Haggen-acquired stores below levels consistent with the ordinary course of business just prior to conversion, resulting in out of stocks which negatively impacted the shopping experience upon Haggen grand openings;
• Deliberately overstocking perishable inventory at Haggen-acquired stores beyond levels consistent with the ordinary course of business just prior to conversion such that Haggen had to throw away significant amounts of inventory it paid for;
• Removing store fixtures and inventory from Haggen-acquired stores that Haggen paid for;
• Diverting Haggen inventory to Albertsons stores; and
• Failing to perform routine maintenance on stores and equipment.

“Albertson’s anti-competitive conduct caused significant damage to Haggen’s image, brand, and ability to build goodwill during its grand openings to the public,” according to the complaint. The complaint continued, “Albertson’s unlawful acts destroyed or substantially lessened the economic viability, marketability and competitiveness of the [Haggen] Stores, depriving consumers in each of the Relevant Markets the benefits of substantial competition from a new market entrant.”

As was reported December 22, 2014, in The Real Estate Daily News when AB Acquisition LLC (Albertsons) and Safeway Inc. (NYSE: SWY) first announced a merger subject to approval by the Federal Trade Commission (FTC), to sell 168 stores across eight states to four buyers. Haggen closed on the purchase of three stores in the Tucson market in May, 2015.

• A former Safeway at 10380 E. Broadway Blvd, Tucson;
• A former Albertsons at 1350 N. Silverbell Road, Tucson; and
• A former Safeway at 8740 E. Broadway Blvd, Tucson

Haggen, three months later in August, announced the closure of the two former Safeway stores.

Bellingham-based grocery chain Haggen has converted two Safeways and one Albertsons, three Tucson stores in total, to the Haggen brand. They are:

• Former Safeway at 10380 E. Broadway Blvd, Tucson;
• Former Albertsons at 1350 N. Silverbell Road, Tucson; and
• Former Safeway at 8740 E. Broadway Blvd, Tucson

According to public record, Hagen has also purchased the former Safeway store at 8740 East Broadway Blvd, for $3.9 million ($74 PSF) for the 52,566-square-foot anchor building, constructed in 1982.

As was reported December 22, 2014, in The Real Estate Daily News when AB Acquisition LLC (Albertsons) and Safeway Inc. (NYSE: SWY) first announced a merger subject to approval by the Federal Trade Commission (FTC), to sell 168 stores across eight states to four buyers.

Haggen purchased the majority of these stores, a total of 146 stores across Arizona, California, Nevada, Oregon and Washington. The store conversion started in February in Oregon and has proceeded rapidly to convert all 146 stores, 83 stores in California, 20 Oregon stores, 33 in Nevada and 10 Arizona stores were converted throughout March, April and May.

“This momentous acquisition is a once-in-a-lifetime opportunity to rapidly expand the Haggen brand across the West Coast,” said John Caple, chairman of the Haggen board of directors and partner at Comvest Partners, a private investment firm that owns the majority share of Haggen. With the deal closed, Haggen has focused on seamlessly converting these 146 stores to the Haggen brand with each conversion taking but a couple of days to complete.

The company said in a written statement that during the transformation, each store’s employees were invited to become Haggen employees. Union leaders also reported that Haggen has assumed Albertsons’ labor contract and that workers will keep their pay, benefits, pension and seniority.

Haggen expanded from owning 18 stores with 16 pharmacies to now 164 stores with 106 pharmacies; from 2,000 employees to more than 10,000 employees; and from a Pacific Northwest regional company with locations in Oregon and Washington to a major regional grocery chain now with locations in Washington, Oregon, California, Nevada and Arizona.

Log in for additional information and see RED Comp #2967.

[mepr-show rules=”58038″]Sale price was $3,865,093 closed 5/29/2015 in an all cash deal.[/mepr-show]

BOISE, ID and PLEASANTON, CA – AB Acquisition LLC (Albertsons) and Safeway Inc. (NYSE: SWY) jointly announced Friday that they have entered into agreements, subject to approval by the Federal Trade Commission (FTC), to sell 168 stores across eight states to four buyers:

• >> Associated Food Stores (AFS) will purchase eight stores in Montana and Wyoming;
• >> Associated Wholesale Grocers (AWG)/Minyards will purchase 12 stores in Texas;
• >> SUPERVALU will purchase two stores in Washington; and
• >> Haggen will purchase 146 stores across Arizona, California, Nevada, Oregon and Washington.

Divestiture of these stores is being undertaken in order to secure FTC clearance of the companies’ proposed merger, which was announced in March with the Albertsons Safeway merger and is expected to close in January 2015. The purchase agreements with the four buyers are all subject to approval by the FTC.

Arizona stores on the divestiture list include:

• >> Albertsons 174 East Sheldon Prescott AZ 86301
• >> Albertsons 1980 Mcculloch Blvd Lake Havasu City AZ 86403
• >> Albertsons 7450 E Highway 69 Prescott Valley AZ 86314
• >> Albertsons 1350 N Silverbell Road Tucson AZ 85745
• >> Albertsons 34442 N Scottsdale Road Scottsdale AZ 85262
• >> Albertsons 11475 E Via Linda Scottsdale AZ 85259
• >> Albertsons 1416 E Route 66 Flagstaff AZ 86001
• >> Safeway 8740 East Broadway Tucson AZ 85710
• >> Safeway 10380 East Broadway Boulevard Tucson AZ 85748
• >> Safeway 3655 W. Anthem Way Anthem AZ 85086

Under the terms of the purchase agreements, the buyers will acquire the stores, equipment and inventory, and they intend to hire most, if not all, of the store employees upon the closing of the purchase of the stores.. For a complete list of stores to be divested, Albertsons Store List and Safeway Store List.

“We’re pleased to have found strong buyers for these stores and to have completed this important step toward combining Albertsons and Safeway,” said Safeway President and Chief Executive Officer Robert Edwards, who will serve as the combined company’s President and CEO. “We look forward now to the transaction’s close, so we can begin working together to enhance the loyalty of grocery shoppers by delivering high quality products, great service and lower prices to become the favorite local supermarket in every neighborhood we serve.”

Pacific Northwest grocery chain Haggen will expand from 18 stores with 16 pharmacies to 164 stores with 106 pharmacies; from 2,000 employees to more than 10,000 employees; and from a Pacific Northwest company with locations in Oregon and Washington to a major regional grocery chain with locations in Washington, Oregon, California, Nevada and Arizona.

Founded in 1933, Haggen, Inc. is one of the Pacific Northwest’s leading grocery chains. The Bellingham, Washington-based company operates stores in Washington and Oregon under the Haggen Northwest Fresh banner. It is the state’s sixth-largest private company with the majority of shares owned by Comvest Partners. Haggen is dedicated to providing its guests with the best of the Northwest. For more than 80 years, it has supported regional farms, ranches, fisheries and other businesses, creating a lasting and sustainable local food economy. Haggen is also deeply rooted in the communities it serves, providing support to local events and partnerships

The company will be led by CEOs John Clougher and Bill Shaner. Clougher, CEO, Pacific Northwest, will have primary responsibility for the northern division of Washington and Oregon. Shaner, CEO, Pacific Southwest, will have primary responsibility for the southern division of California, Nevada and Arizona. The two will work together to steward the company’s commitment to its employees, customers, business partners and stakeholders.

After the close of the transaction in early 2015, Haggen will convert all of the acquired Albertsons and Safeway stores to the Haggen banner in phases during the first half of 2015. All Albertson’s LLC and Safeway store employees will have the opportunity to become employees of Haggen as their individual stores are transitioned to the Haggen banner. Haggen plans to retain the current store management teams.  To learn more visit haggen.com.