Kroger/Scott's Deal Said Valued at Below-Market Price

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Kroger/Scott's Deal Said Valued at Below-Market Price

CINCINNATI - The Kroger Co. here is paying less than $3.3 million for each of the 18 Fort Wayne, Ind.-based Scott's Food & Pharmacy stores it is acquiring from Supervalu - far less than the typical $8 million to $12 million selling price for similar grocery stores -- prompting local observers to speculate that the below-market value price might make it easier for Scott's new owner to justify closing stores.

A transaction must not exceed $59.6 million in order to avoid a review by the Federal Trade Commission, which is not reviewing the Kroger/Scott's deal, Indianapolis-based Kroger spokesman John Elliott was quoted saying in the Fort Wayne Journal Gazette.

David Livingston, managing partner of DJL Research LLC, said Eden Prairie, Minn.-based Supervalu Inc. "basically gave the stores away" for the value of the real estate and fixtures.

Kroger officials have been reportedly meeting with Scott's employees to talk about their futures, and to learn what makes Scott's shoppers tick. The latter chain's real estate teams have also been doing inspections of Scott's stores, checking the condition of roofs and aspects of the physical plants.

Supervalu recently filed documentation with the Indiana Department of Workforce Development that it will soon lay off 53 people. Under the federal Worker Adjustment and Retraining Notice (WARN) statute, businesses must file a "warn notification" at least 60 days before massive layoffs.

A letter sent to the state from a Supervalu lawyer said that layoffs will begin June 18 and continue during at least a two-week period. "Affected employees do not have bumping rights and are not represented by a union," the letter said.
The employees include two administrative assistants, a bakery specialist, the director of marketing and advertising, a supplies clerk and seven item-management coordinators.

Scott's employs 1,320 people, most of whom will be offered jobs with Kroger, according to a company spokeswoman.