Giant Food, Royal Ahold merger OK'd Antitrust approval clears way for Dutch to buy Landover chain

Takeover likely next week

'Changes may come quicker than people think,' observer says

Supermarkets

October 21, 1998|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

International food retailer Royal Ahold NV got federal antitrust approval yesterday to purchase Giant Food Inc. and expects to settle the $2.7 billion deal next week.

The Federal Trade Commission cleared the way for the merger with a 4-0 vote after Royal Ahold agreed to sell 10 stores in Maryland and Pennsylvania. The store divestitures, agreed to in September, will keep supermarket prices competitive in eight communities where an Ahold chain competes with Landover-based Giant, the FTC said.

The purchase of its fifth U.S. grocery chain will make Royal Ahold the nation's fifth-largest supermarket company, with projected annual sales of $35 billion. The Dutch retailer said yesterday that it will complete its tender offer of $43.50 a share for Giant's Class A nonvoting stock tomorrow, then go to settlement Oct. 28. Shareholders will likely be paid within several days, the company said.

"Then Giant Food Inc. will become part of the Ahold family," said Hans Gobes, a spokesman for Royal Ahold, who was in Landover yesterday. "Immediately, we can make Giant Food Inc. benefit from the economies of scale of being part of such a huge operation in the United States."

Royal Ahold, currently a $26 billion company, has 3,200 stores worldwide.

For Giant Food, which sprouted from a single Washington store in 1936 into the region's dominant chain with 179 supermarkets in Maryland, Virginia, Delaware, Pennsylvania, New Jersey and Washington, the sale means the end of a local institution.

"It's the close of an era of an independent Giant, and it's the start of what I consider greater opportunities for our company in the future," Giant Chairman Pete L. Manos said yesterday.

"Certainly we're going to be working with them to find ways to buy better and reduce our cost, due to the synergies we have together," Manos said. "In sharing our philosophies and different marketing strategies and different ways of doing business, we'll come up with ways to cut costs and improve product mix."

By next year, Giant and Ahold's other East Coast chains, including BI-LO, Giant Food Stores of Carlisle, Pa., Tops Markets, and Stop & Shop, could be swapping private label products, though each store would keep its own brand name, Gobes said. Giant has said it plans to expand its private label offerings to keep prices competitive.

Giant and Ahold officials also said they will be reviewing areas in which the two companies' operations overlap, including manufacturing and distribution.

Dave Callahan, editor of the Columbia-based Food World trade publication, said change likely would come swiftly.

"Ahold certainly is going to assert itself and changes may come quicker than people think. I doubt there will be very many changes the consumer will notice, but I think there will be a lot of back room and administrative changes," he said.

Giant and Ahold announced plans for the acquisition in May. The proposal has gone through a lengthy FTC review of areas in which the two companies competed, said Phillip L. Broyles, assistant director of the FTC's bureau of competition.

"Then we had to look at who else was competing in that market and who was likely to enter the market," Broyles said.

In Maryland, the FTC focused on Bel Air, Westminster, Eldersburg and Frederick, where Giant competes with Martin's Food Markets, which are run by Ahold's Giant Food Stores of Carlisle.

Richfood Holdings Inc. is buying the Westminster Martin's, which will become a Metro Food Market. In Bel Air, Fleming Cos. Inc., the nation's second-largest supermarket wholesaler, is buying Martin's and converting it to Festival Foods. Two Martin's in Frederick are being sold to Frederick County Foods LLC, to become County Market stores.

The sale of the Eldersburg Giant to Safeway Inc. will be final Friday. Giant will run the store through the close of business Saturday.

Safeway employees, about a quarter of whom will come from Giant, will be restocking the store until Wednesday, when it will reopen as Safeway, said Greg Ten-Eyck, spokesman for Safeway's Eastern Division.

Pub Date: 10/21/98

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