Smart & Final, Albertsons Big Winners in Grocery Bankruptcy

By Gail Kalinoski, Contributing Editor

As the East Coast grapples with the fallout from the bankruptcy sale of nearly 300 Great Atlantic & Pacific Tea Co. (A&P) locations, the West Coast has its own version of supermarket sweep with the disposition of over 100 stores owned by Bellingham, Wash.-based Haggen Holdings L.L.C.

Haggen filed for bankruptcy protection in September, just months after acquiring 146 stores from Albertsons and Safeway. Before approving the merger, the Federal Trade Commission ruled the two chains had to divest properties. Haggen, then an 18-store regional player in Washington and Oregon, bought 146 stores but could not manage its larger size. Ironically, Albertson’s L.L.C., a Boise, Idaho-based company, received federal bankruptcy court approval this week to acquire 30 of the Haggen stores for a reported $14 million. All of the stores were former Albertsons, Safeway or Vons locations before being sold to Haggen earlier this year.

The 30 stores are located in California, Washington, Arizona, Nevada and Oregon. Albertsons was the successful bidder at an auction in November. The company expects to close on the transaction in the next few weeks and hopes to re-open the stores under its various operating banners in 2016.

“We are pleased to be returning to these locations and have the opportunity to create great jobs in these communities,” Bob Miller, Albertsons chairman & CEO, said in a prepared statement. “The process of re-opening these stores as Albertsons, Safeway and Vons locations will take some time for us to obtain the appropriate licenses, but we are confident that our operating playbook will help us create stores that customers will love to shop in again.”

Commerce, Calif.-based Smart & Final Stores, Inc., said its subsidiary, Smart & Final Stores, L.L.C., will buy 32 leases and related assets in Central and Southern California for approximately $68 million. Four of those were stalking-horse bids. The transaction should close before the end of the year.

Smart & Final said it plans to convert those locations to its Extra! format, which includes expanded frozen, deli and meat selections; specialty products; and expanded natural and organic offerings. Founded over 140 years ago, it is one of the longest continuously operated food retailers in the United States. The new stores will go towards Smart & Final’s Project 100 plan to add 100 stores and at least 5,000 new employees over the next four years.

“We are excited to build upon our footprint in the important California market. This strategic acquisition puts us ahead in ‘Project 100,’ our plan to open 100 new stores, add 100 new teams and invest in 100 new neighborhood projects in the next four years,” David Hirz, Smart & Final CEO, said in a prepared statement. “We continue to see significant room for growth within our existing markets. Through the acquisition of the Haggen stores, we will capture some of this opportunity.”

Gelson’s Markets will buy eight California locations for $36 million. The bankruptcy court has also approved the sale of four stores to Sprouts Farmers Market; three to Tawa Inc.; and one each to Tustin Safe, L.L.C., Good Food Holdings, Stater Bros Markets, Good Food Holdings, Donahue Scribner Realty Group, Regency Centers, L.P. and Yokes Foods, Inc.

When it announced plans to reorganize under Chapter 11 bankruptcy proceedings in September, Haggen officials said at the time they would sell most of the company’s holdings and reorganize around 32 “core” stores in the Pacific Northwest. But the Seattle Times is reporting that Haggen has asked for court permission to hold an auction in January for those locations too. Comvest Partners, the private equity firm that owns Haggen, could be a bidder for those stores, according to the newspaper.

Stroock & Stroock & Lavan, L.L.P, and Young, Conway, Stargatt & Taylor, L.L.P., serve as legal counsel to Haggen. Sagent Advisors are its real estate advisors and Alvarez & Marsal are restructuring advisors.