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Workers May Pay the Price in Safeway Sale

December 15, 1987|HARRY BERNSTEIN

The jobs of an unknown number of Safeway's 11,300 workers in Southern California have been put at risk by the latest financial maneuver of an investment firm that was perhaps overgenerously dubbed a "white knight" last year when it rescued the grocery chain from the clutches of some alleged "greenmailers."

The impact of the white knight's rescue effort has been profitable for those who own or manage the company. But, in the long run, consumers may lose. Many workers have already been hurt, and the final damage to them has not yet been calculated.

Congress and the Administration should look closely at the Safeway story to see whether new antitrust laws--or just stricter enforcement of present ones--are needed to help protect consumers and workers when financial giants are playing high-stakes corporate games.

The white knight, Kohlberg Kravis Roberts, is the principal owner of Safeway, and its new maneuver involves selling 172 of its stores in Southern California to Vons Co.

If the government doesn't block the deal, it should turn out just fine for KKR, since Safeway is getting $325 million in cash for its stores, along with 30% of Vons' stock, making KKR Vons' largest stockholder.

And it should turn out fine for Vons' management and shareholders because the deal would make it California's biggest supermarket chain.

The only victims of the deal will be those workers who get laid off in a consolidation and consumers who may have to pay higher prices because the acquisition will reduce supermarket competition.

Neither the endangered workers nor the consumers can expect help from President Reagan's Federal Trade Commission or other regulatory agencies, although the Clayton antitrust law seems pretty clear:

"No corporation shall acquire the whole or any part of the assets of another corporation where . . . the effect may be substantially to lessen competition."

True, the U.S. Supreme Court ruled in 1966 that Vons had violated antitrust law when it bought just 36 stores from a competitor, Shopping Bag Food Stores, in the late 1950s. Vons was ordered to get rid of the 36 stores, and it did. But those were the days when the nation's antitrust laws were being rigorously enforced.

The FTC last August did intervene minimally when it required the buyer of 59 Safeway stores in Texas and New Mexico to sell 12 of them to avoid prosecution.

Now, the FTC will automatically review the much larger sale of Safeway stores to Vons. But with the new "mergers-are-not-all-that-bad" attitude of the present Administration, Vons' acquisition of 172 stores from Safeway isn't likely to run into the kind of trouble it faced when it bought only 36 stores during the Eisenhower Administration.

More than 8,500 Safeway workers lost their jobs after KKR first moved in last year to save Safeway from the clutches of the father-son team of Herbert H. Haft and Robert M. Haft of Landover, Md.

To protect Safeway from the apparent threat of a hostile takeover, KKR bought it by loading Safeway with a total debt of $5.6 billion. That hefty amount was reduced to about $3.8 billion by selling huge chunks of Safeway assets around the United States and in Britain and Australia.

The first stage of the "rescue" went well, except, for course, for the thousands of Safeway workers who lost their jobs.

The deal made millions for the Hafts and their financial consultants, Drexel Burnham Lambert; for Safeway stockholders; for KKR and its financial consultants, Morgan Stanley, and for a host of bankers, lawyers, accountants and assorted other "consultants."

However, the Safeway debt incurred to protect it was still enormous. So in comes Vons to buy the Southern California stories that weren't touched in the initial moves to reduce the massive debt burden, moves that are euphemistically known as restructuring.

Officials of the two companies and of the unions that represent the 20,000 Vons' workers and the 11,300 Safeway workers in Southern California all say they expect that the latest phase of the Save Safeway operation will not hurt nearly as many Safeway workers as the first phase did.

The companies, particularly, talk about hopes of not only keeping Safeway stores after giving them the name of their new owner, but of expanding some to make room for workers who are laid off in the consolidation.

The unions, primarily the United Food and Commercial Workers and the Teamsters, have generally good relations with both Safeway and Vons and believe that the companies will provide severance pay and other benefits for workers who are zapped by consolidation.

Their primary basis for optimism, though, is that they figure that Vons and its largest stockholder, old white knight KKR, want Vons to grow bigger and bigger, which would mean more jobs for workers--in Vons' stores.

The trouble with such optimism is that, for it to really work, Vons will have to take customers away from its competitors, and that means fewer workers will be needed in the competitors' stores--in other words, more layoffs.

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