Crain's Chicago Business reports that the general consensus among analysts seems to be that if or when Safeway sells its Dominick’s division in Chicago, it is not likely to recoup the $1.8 billion it spent to acquire the company just four years ago, much less the money it has invested in it since that time.
Analysts say that $1.2 billion is a likely sale price for Dominick’s.
Two of the problems seen as bringing down the price are the company’s “public discord” under Safeway management, and its poor performance and declining market share.
It also is seen as at least possible that whatever company buys Dominick’s, closing or selling under-performing stores will be seen as an option.
Safeway’s decision to put Dominick’s on the market was part of the agreement it reached with the United Food and Commercial Workers (UFCW) union after its contract with 8,900 workers expired. Safeway wanted significant concessions, the union didn’t want to give them. Safeway said that if the union didn’t accept its last offer, it would close or sell the division. The workers authorized a strike but didn’t actually strike the company, though there was the suggestion that Thanksgiving weekend might be a good time to strike the company. The two sides then came to an agreement last week in which Safeway agreed to reinstate the terms of the expired contract, pay a bonus if the union ratified the agreement, and then put the division up for sale. (How’s that for a recap?)
According to Crain’s, Safeway has 60 days to make a “good faith” effort to sell Dominick’s to a company that will recognize the union; after that, it call sell to anyone, close down the division…or even decide to keep it.
Analysts say that $1.2 billion is a likely sale price for Dominick’s.
Two of the problems seen as bringing down the price are the company’s “public discord” under Safeway management, and its poor performance and declining market share.
It also is seen as at least possible that whatever company buys Dominick’s, closing or selling under-performing stores will be seen as an option.
Safeway’s decision to put Dominick’s on the market was part of the agreement it reached with the United Food and Commercial Workers (UFCW) union after its contract with 8,900 workers expired. Safeway wanted significant concessions, the union didn’t want to give them. Safeway said that if the union didn’t accept its last offer, it would close or sell the division. The workers authorized a strike but didn’t actually strike the company, though there was the suggestion that Thanksgiving weekend might be a good time to strike the company. The two sides then came to an agreement last week in which Safeway agreed to reinstate the terms of the expired contract, pay a bonus if the union ratified the agreement, and then put the division up for sale. (How’s that for a recap?)
According to Crain’s, Safeway has 60 days to make a “good faith” effort to sell Dominick’s to a company that will recognize the union; after that, it call sell to anyone, close down the division…or even decide to keep it.
- KC's View:
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Oy.
Why do we have the feeling that this story isn’t over yet?
One thing that seems likely is that if there is a buyer for the company, it will be interested in keeping most of the stores and the Dominick’s name…though we’d guess that at least part of the chain will end up being peddled to another buyer at some point along the line.
The shame is that Ahold won’t be participating in the process; spokesmen for the company have said it is not interested. It might’ve been a perfect fit for Ahold, but since that company is having its own economic problems, acquiring Dominick’s just doesn’t seem to be in the cards.
The long shot would seem to be Safeway keeping the company because it can’t justify the loss it is going to take…but sometimes betting long shots is the way to really make a buck.
