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The Chicago Tribune reports that as Kroger and Supervalu experience second thoughts about bidding for Safeway’s Dominick’s division in Chicago, leveraged buyout specialists Kohlberg Kravis Roberts & Co. (KKR) and Yucaipa Cos., the private equity vehicle of Ronald Burkle, are engaged in a contest for the division with Wisconsin-based Roundy’s. There also is said to be the possibility of a bid by Dominick’s current management team.

The ironic thing about these bids is that they all involve companies that had a previous connection with the company. KKR has had a major stake in Safeway, which is selling the company. The Tribune notes that Yucaipa used to own Dominick’s, having acquired it from the founding DiMatteo family and taken it public in 1996. And Roundy’s is run by former Dominick’s CEO Bob Mariano.

The Kroger and Supervalu hesitation apparently is linked to a preference to grow in the Windy City organically.

Safeway decided to sell Dominick’s after a bitter labor battle last year, which only cemented its conviction that it would not be able to make the division profitable under its existing union contracts. A decision is expected by the end of June.
KC's View:
The criticism, of course, is that Safeway, in following conventional wisdom, alienated consumers by centralizing operations and eliminating the local products and touches that made the company special.

Clearly someone thinks they can make Dominick’s work.