NEW YORK -- Albertson's Inc. is buying American Stores Co., owner of Acme, Jewel and Lucky stores, for $8.3 billion to create the nation's biggest supermarket chain.
The deal, announced today, would combine more than 2,470 stores in 37 states, to take over the No. 1 spot from Kroger.
Albertson's corporate headquarters will remain in Boise, Idaho, and the company will keep its name. Albertson's intends to retain both companies' current store names, although some individual store names may change.
As supermarkets themselves have grown into vast emporiums, the companies that operate them in recent years have been striving to get ever bigger as well. Increased size gives the store companies greater strength in bargaining with suppliers.
According to Business Week's Aug. 10 edition, there's even been speculation that Kroger may be considering a merger with Safeway, which was the No. 2 supermarket chain in sales last year, or may make a large acquisition on its own.
Albertson's operates in the Midwest, West and southern states. While American Stores is spread across the country, most of its stores are in California and Texas. American Stores also operates Osco Drug and Sav-on drug stores.
Gary G. Michael, chairman and chief executive of Albertson's, acknowledged the increased competitive pressure as a reason for the deal.
In addition to the $8.3 billion worth of stock Albertson's is paying for American Stores, the company will also assume responsibility for $3.4 billion worth of American Stores' debt.
American Stores shareholders are to receive 0.63 shares of Albertson's stock for each share of American Stores stock they own.
Based upon Albertson's closing stock price of $48.00 per share on July 31, 1998, the deal is worth $30.24 per share for American shareholders and American Stores shareholders would own 41.3 percent of Albertson's.
Michael is to remain as chairman and chief executive and Victor L. Lund, chairman and chief executive of American Stores, will be vice chairman of the combined company.
Following the merger, Albertson's expects a significant, though as yet unspecified, one-time reduction in its profits.
American Stores stock was up $3.81¨ at $27 in early trading on the New York Stock Exchange. Shares in Albertson's were down $2.68Ü at $45.31¨ on the NYSE.