Yucaipa Cos. has sued Safeway Stores for allegedly mishandling Safeway’s sale of Dominick’s Finer Foods. Safeway plans to file a counterclaim.
The suit, filed in U.S. Superior Court in Los Angeles last week, charges Safeway with conducting “a biased and unfair sale process” to sell Chicago grocer Dominick’s to Supervalu, Minneapolis. Yucaipa claims that Safeway passed over its $350 million bid in favor of a smaller bid, reportedly from Supervalu. Yucaipa sold the Dominick’s, a 113-stsore chain, to Safeway in 1998.
Yucaipa wants the court to force Safeway to reopen bidding, pay damages for the cost of failed negotiations and release Yucaipa from its promise to help Safeway negotiate with union workers.
Pleasanton, CA-based Safeway announced on July 3 that it had accepted a bid.
A Safeway statement calls the allegations “completely without merit.” Safeway says it conducted a fair auction and chose the best bidder based on the advice of its investment bankers.
“Yucaipa was given an opportunity to submit the best bid. It did not do so,” Safeway said in a statement.
Safeway put Dominick’s on the block last fall after bitter contract negotiations with the United Food and Commercial Workers Union, who threatened to strike. Safeway, in turn, threatened to close stores if there was a strike. The stand off was resolved when Safeway extended its existing contract to July 26, 2003 and vowed to sell Dominick’s to a “union-friendly” buyer by then. Safeway bought Dominick’s in 1998 for $1.9 billion; it’s thought to be worth about $320 million now.
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