PLEASANTON -- The federal government has asked Safeway to hand over more information about its plans to merge with Albertsons and create a national supermarket conglomerate, marking the latest step in a thorny deal between two of the nation's largest grocers.
Safeway said on Thursday it was working to provide those documents to the Federal Trade Commission, which likely will outline how the Pleasanton-based grocer plans to comply with antitrust laws as it moves forward with a landmark supermarket merger.
"For a transaction of this size ... a second request for information is common practice and not unexpected," said Safeway spokesman Brian Dowling. "We continue to work cooperatively with FTC and expect to satisfy all of their information needs within a reasonable time. We still expect the merger to be complete in the fourth quarter of this year."
The planned merger, orchestrated by New York private equity firm Cerberus, which bought Safeway last month in a $9.4 billion deal, is expected to result in stores closing or others being sold to competing grocers. The government's request for additional information likely signals that it wants the grocer to offer more details on which stores it will divest as part of the merger. The FTC is looking for places where both Safeway and Albertsons dominate the grocery market, and wants to ensure other grocers can open stores and compete.
"If it has market power and that market power becomes too great, then that's where the FTC will want them to divest," said Samina Karim, professor in the School of Management at Boston University and expert in mergers and acquisitions.
Combined, the two grocery chains will have about 2,400 stores, which will overlap in several areas of the country, including Southern California, Washington, Oregon, Colorado, Arizona and Texas.
Just 3 percent of companies that apply for merger and acquisition approval with the FTC receive a second request for information, according to data from 2012. However, few deals match the size and complexity of the Safeway merger, experts said.
The FTC has 30 days to make a decision. It could sue to stop the merger, but that's unlikely, Karim said. "I would not expect the FTC to block this. It's not a surprise to them that this market has a lot of consolidation," Karim added.
In 2012, the FTC reviewed 1,429 mergers and acquisitions. It sued to block just 10 of those -- less than 1 percent. That same year, the FTC negotiated and settled with 15 companies that had to divest or make other changes to meet federal laws.
Contact Heather Somerville at 510-208-6413. Follow her at Twitter.com/heathersomervil.