SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 2, 1998 Commission file number: 1-6187
ALBERTSON'S, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 82-0184434
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(State of Incorporation) (Employer Identification Number)
250 Parkcenter Blvd., P.O. Box 20, Boise, Idaho 83726
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (208) 395-6200
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Item 5. Other Events.
Albertson's, Inc. and American Stores Company have entered into a definitive
merger agreement in which the two companies will be combined, forming the
largest retail food and drug company in the United States. The combined company,
Albertson's, Inc., will operate more than 2,470 stores in 37 states, with pro
forma 1998 estimated annual sales of approximately $36 billion and more than
218,000 employees.
The transaction, which is expected to close in early 1999, has a total value of
approximately $11.7 billion, consisting of equity value of $8.3 billion and net
debt of $3.4 billion. Excluding one-time charges, the transaction is expected to
be accretive to Albertson's earnings per share in 1999 and to accelerate
Albertson's annual earnings growth in subsequent years through the realization
of approximately $300 million of annual cost savings.
Under the terms of the transaction, American Stores Company shareholders will
receive 0.63 shares of Albertson's Common Stock for each share of American
Stores Company Common Stock they own. Based upon Albertson's July 31, 1998,
closing stock price of $48.00 per share, the transaction has a value of $30.24
per share for American Stores Company shareholders. Albertson's will issue
approximately 172.8 million shares in the transaction. Following closing of the
merger, American Stores Company shareholders would own 41.3 percent of
Albertson's. The companies have entered into cross options under which each
company has been granted an option to purchase up to 19.9 percent of the other
company's common stock under certain conditions.
The preceding is qualified in its entirety by reference to the press
release issued by the Registrant on August 3, 1998 which is attached hereto as
Exhibit 99.1.
Item 7. Exhibits.
Exhibit
No. Description
99.1 Press Release dated August 3, 1998
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SIGNATURE
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, Albertson's, Inc. has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ALBERTSON'S, INC.
Date: August 5, 1998 BY: /s/ Thomas R. Saldin
Thomas R. Saldin
Executive Vice President, Administration
and General Counsel
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INDEX TO EXHIBITS
FILED WITH THE CURRENT REPORT
ON FORM 8-K DATED AUGUST 2, 1998
Exhibit
No. Description
99.1 Press Release dated August 3, 1998
Exhibit 99.1
August 3, 1998
FOR IMMEDIATE RELEASE
ALBERTSON'S, INC. AND AMERICAN STORES COMPANY TO MERGE
Albertson's, Inc. (NYSE:ABS) and American Stores Company (NYSE:ASC)
today announced that they have entered into a definitive merger agreement in
which the two companies will be combined, forming the largest retail food and
drug company in the United States. The combined company, Albertson's, Inc., will
operate more than 2,470 stores in 37 states, with pro forma 1998 estimated
annual sales of approximately $36 billion and more than 218,000 employees.
The transaction, which is expected to close in early 1999, has a total
value of approximately $11.7 billion, consisting of equity value of $8.3 billion
and net debt of $3.4 billion. Excluding one-time charges, the transaction is
expected to be accretive to Albertson's earnings per share in 1999 and to
accelerate Albertson's annual earnings growth in subsequent years through the
realization of approximately $300 million of annual cost savings.
Under the terms of the transaction, American Stores Company
shareholders will receive 0.63 shares of Albertson's Common Stock for each share
of American Stores Company Common Stock they own. Based upon Albertson's July
31, 1998, closing stock price of $48.00 per share, the transaction has a value
of $30.24 per share for American Stores Company shareholders. Albertson's will
issue approximately 172.8 million shares in the transaction. Following closing
of the merger, American Stores Company shareholders would own 41.3 percent of
Albertson's. The companies have entered into cross options under which each
company has been granted an option to purchase up to 19.9 percent of the other
company's common stock under certain conditions.
"This transaction provides for the strategic combination of two
outstanding companies with complementary strengths and common values," said Gary
G. Michael, chairman and chief executive officer of Albertson's, Inc. "At a time
when the supermarket industry is under increasing pressure to enhance value to
customers through cost effective operations, this merger has been designed to
assist us in continuing to provide superior value and service to our customers
and compete successfully in today's marketplace.
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"We expect the new Albertson's will be an industry leader, with
well-known store names and private label brands," Mr. Michael continued. "We
will have a seasoned and proven management team at both the corporate and
division levels. We will have a sound balance sheet and strong cash flow, which
will enable us to continue our combined capital spending and debt reduction
programs at current levels. In short, our potential for enhanced revenue and
earnings growth is tremendous."
Victor L. Lund, chairman and chief executive officer of American Stores
Company, said, "We are pleased to be joining forces with Albertson's, which is
one of the most admired and best managed companies in our industry. In forming
the largest food and drug retailer in the country, this transaction will provide
new opportunities for our employees, who are among the best in the business. It
will also ensure that our customers continue to receive high quality, great
value and excellent service.
"I believe that this strategic combination is in the best interests of
our employees, customers and shareholders, providing them with the opportunity
to participate in the growth of an exciting company with outstanding people and
a promising future. Because of our consistent business philosophies and similar
corporate cultures, I am confident the integration of these two companies will
go very smoothly."
The transaction was unanimously approved by the boards of directors of
both companies. The merger is subject to certain conditions, including approval
by the shareholders of both companies and regulatory approval. The combination
has been structured to be a tax-free transaction and is expected to be accounted
for as a pooling of interests.
Upon completion of the merger, Mr. Michael will continue as chairman
and CEO of Albertson's. Mr. Lund will serve as vice chairman of the combined
company. Albertson's will increase its board from 15 to 20 directors. In
addition to Mr. Lund, four other current members of the American Stores Company
board will join the Albertson's board.
Albertson's corporate headquarters will remain in Boise, Idaho.
Albertson's intends to retain both companies' current store names, although the
names of individual stores may change, depending on their size, location and
other factors.
Following the merger, Albertson's expects to record significant
one-time charges in connection with the combination. The magnitude of the
one-time charges has not yet been determined.
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Both Albertson's and American Stores Company announced that they have
rescinded their respective stock buyback programs.
Mr. Michael said, "This merger will yield significant strategic and
financial benefits and is a defining milestone in our ongoing program to
accelerate sales growth, increase profitability and enhance shareholder value.
"From a strategic standpoint, this transaction will strengthen our
presence in many of our existing markets across the country -- particularly in
Northern and Southern California and the Southwest -- and enables us to enter
important urban markets like Chicago and Philadelphia for the first time.
"Additionally, we will enter the stand-alone drug store business for
the first time. By combining our fast-growing pharmacy businesses we expect to
achieve significant benefits such as improved procurement and distribution, more
efficient systems and processes, and an enhanced ability to participate in
third-party pharmacy reimbursement plans.
"Financially, we expect to achieve substantial food and drug synergies
through a combination of cost reductions, enhanced purchasing ability and
greater volumes and efficiencies in our existing markets. We expect these annual
synergies to total approximately $300 million in the third year, with at least
$100 million occurring by the end of the first year."
Albertson's expects to achieve savings of approximately $100 million
from buying and distribution efficiencies in the combined food and drug
operations. The company expects savings of approximately $200 million from a
reduction of overhead, including redundant administrative functions and
information systems, as well as a reduction of advertising expenditures in
overlapping markets. The company will streamline operations, with common systems
and a "best practices" approach in all areas.
"We are pleased to welcome the well-trained, motivated and loyal employees
of American Stores Company. Their commitment to customer service is a great fit
with Albertson's outstanding employees," Mr. Michael concluded.
Merrill Lynch & Co. served as financial advisor to Albertson's and The
Blackstone Group served as financial advisor to American Stores Company. Fried,
Frank, Harris, Shriver & Jacobson served as legal advisor to Albertson's and
Wachtell, Lipton, Rosen & Katz served as legal advisor to American Stores
Company.
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American Stores Company operates 1,558 stores in 26 states including
269 food and drug combination stores, 539 supermarkets and 750 stand-alone drug
stores. Its supermarkets and combination stores operate under the "Acme
Markets," "Jewel Food Stores," and "Lucky Stores" names. Its drug stores operate
under the "Osco Drug" and "Sav-on" names.
Albertson's, Inc. is one of the largest retail food-drug chains in the
United States. The Boise, Idaho-based company currently operates 916 retail
stores in 23 Western, Midwestern and Southern states.
This news release contains certain forward-looking statements
including, among other things, statements regarding expected synergies, cost
savings and other strategic and financial benefits. These forward-looking
statements are based on current expectations, but actual results may differ
materially from those projected or suggested in such forward-looking
information. The companies do not undertake to update such forward-looking
statements to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking information. Assumptions that could cause
actual results to differ from those set forth in the forward-looking information
include the companies' ability to successfully implement their strategy and
financial plans in connection with the merger. Additional assumptions and other
information can be found in the companies' Forms 10-Q, filed with the Securities
and Exchange Commission.
* * * * * * * * * *
CONTACT:
Albertson's, Inc. American Stores Company
Boise, Idaho Salt Lake City, Utah
Investor Relations Investor Relations/News Media
A. Craig Olson 208/395-6284 Dan Zvonek 801/961-4525
Renee Bergquist 208/395-6622
News Media 208/395-6392
Mike Read
Jenny Enochson
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DESCRIPTION OF ALBERTSON'S, INC.
ALBERTSON'S, INC.
Business: Retail supermarkets and combination stores
Operates: 916 stores in 23 states plus 44 pending from Buttrey
Food and Drug and 15 pending from Bruno's
1997 Revenues: $14.7 billion
Employees: Approximately 97,000 employees
Corporate Office: Boise, Idaho
ALBERTSON'S FOOD & DRUG
Business: Supermarkets/Combo Stores
Primary Markets: Operates in 20 states
Stores: 859 stores (790 Combo, 69 Conventional)
MAX FOODS
Business: Warehouse Food Stores
Primary Markets: California, Denver, Dallas/Ft. Worth
Stores: 34 stores
SEESSEL'S
Business: Supermarkets/Combo Stores
Primary Markets: Memphis, Tennessee
Stores: 10 stores (8 Combo and 2 Conventional)
SMITTY'S
Business: Supermarkets/Combo Stores
Primary Markets: Springfield and Joplin, Missouri
Stores: 10 Combo stores
SUPER ONE
Business: Warehouse Food Stores
Primary Markets: Des Moines, Iowa
Stores: 3 stores
BUTTREY FOOD & DRUG/BRUNO'S (1)
Business: Supermarkets/Combo Stores
Primary Markets:
Buttrey: Montana, Wyoming, North Dakota
Bruno's: Nashville and Chattanooga, Tennessee
Stores: 59 stores (38 Combo and 21 Conventional)
(1) Pending final approval and completion of transaction.
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DESCRIPTION OF AMERICAN STORES COMPANY
AMERICAN STORES COMPANY
Business: Retail supermarkets and drug stores
Operates: 1,558 stores in 26 states under the "Acme", "Lucky",
"Jewel", "Osco" and "Sav-on" names
1997 Revenues: $19.1 billion
Employees: Approximately 121,000 employees
Corporate Office: Salt Lake City, Utah
JEWEL
Business: Supermarkets/Combo Stores
Primary Markets: Chicago
Stores: 184 stores (157 Combo Stores)
OSCO DRUG
Business: Drug Stores
Primary Markets: Chicago, Kansas City, Phoenix, New England and other
areas
Stores: 438 stores
SAV-ON
Business: Drug Stores
Primary Markets: Southern California, Las Vegas
Stores: 312 stores
LUCKY STORES
Business: Supermarkets/Combo Stores
Primary Markets: California, Las Vegas, New Mexico
Stores: 447 stores (56 Combo Stores)
ACME MARKETS
Business: Supermarkets/Combo Stores
Primary Markets: Philadelphia
Stores: 177 stores (56 Combo Stores)
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STORE LOCATION MAP AND DISTRIBUTION OPERATIONS MAP
Map of United States captioned "Store Location Map" showing the location of
975 Albertson's, Inc. supermarkets and combo stores, 808 American Stores Company
supermarkets and combo stores and 750 American Stores Company stand-alone drug
stores.
Map of United States captioned "Distribution Operations Map" showing the
location of the distribution centers of Albertson's, Inc. and American Stores
Company.
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STRATEGIC RATIONALE
Creates largest retail food and drug company in the United States
Pro forma 1998 estimated annual revenues of approximately $36 billion
More than 2,470 stores in 37 states
More than 218,000 full-time and part-time employees
Strengthens Albertson's position in existing markets
Northern California
Southern California
Southwest
Enables Albertson's to enter important new urban markets
Chicago
Philadelphia
Enables Albertson's to enter stand-alone drug store business
New format
Creates tremendous opportunities for fast-growing pharmacy business
Lower cost of goods sold
Enhanced participation in third-party pharmacy reimbursement plans
Accelerates Albertson's earnings growth
Accretive in first year, excluding one-time charges
$300 million of annual cost savings by the third year
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SIGNIFICANT SYNERGIES
Greater volumes and efficiencies in existing markets
Lower cost of goods sold through enhanced buying and distribution efficiencies
$100 million of annual savings
Substantial cost reductions
$200 million of annual savings from reduction of overhead and advertising
expenditures
ANNUAL SAVINGS OF $300 MILLION BY THE THIRD YEAR
$100 MILLION BY THE END OF THE FIRST YEAR
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AN INDUSTRY LEADER
An experienced management team
Gary Michael continues as chairman and CEO
Victor Lund becomes vice chairman
A proven operating strategy
Albertson's has traditionally been among the most profitable companies in
the industry
A presence in important and promising markets across the country
Strong potential for enhanced shareholder value
Enhanced revenue growth
Strong cash generation
Accelerated earnings growth
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DESCRIPTION YEAR 1 YEAR 2 YEAR 3
General Adopt ABS general office cost 40 80 100
office disciplines. Reduce duplication of
consolidation management, occupancy and general
corporate costs.
Eliminate Move to single "best-of-breed" system 10 25 70
systems in each area. Savings from non-
redundancy repetitive IS&T development and "200"
maintenance, communication networks
and lower depreciation.
In-market Direct costs savings such as 20 25 30
synergies overlapping advertising and field
supervision.
Cost of Opportunities expected primarily in 20 50 70
goods the areas of private label, general
improvement merchandise, pharmacy and seasonal
category.
Distribution Take advantage of potential geograph- 10 20 30 "100"
opportunities ic sourcing re-alignments (ABS Omaha
& Des Moines food stores out of ASC
Chicago facility, ASC Phoenix drug
stores out of ABS Phoenix facility,
etc.).
GRAND TOTAL 100 200 300
