A hostile takeover fight could be brewing for Chandler-based Bashas' Inc., which has been operating under Chapter 11 bankruptcy protection since July 12.
The Boise, Idaho-based operator of 43 Albertsons supermarkets in Arizona said Wednesday that it would persist with a proposal to acquire the 78-year-old Arizona grocery chain.
Earlier this month, Albertsons LLC's CEO Robert Miller sent a letter to Bashas' chairman Eddie Basha Jr. offering a reported $260 million to $290 million for Bashas' 120 stores, distribution network and headquarters.
Bashas' CEO Edward "Trey" Basha said in a statement Wednesday that the company and the unsecured creditors' committee overseeing the bankruptcy proceeding both found the offer "insufficient."
"Both the creditors' committee and Bashas' found the terms in the letter to be insufficient as compared to the 100 percent repayment plan submitted to the Bankruptcy Court, " Basha said.
Albertsons spokeswoman Christine Wilcox called the offer a generous proposal for acquiring the business that the company intends to pursue.
"We would simply like the opportunity to further explore a combination of our operations, which we think can be a win-win for all involved," she said.
Both chains are struggling against larger competitors such as Fry's and Walmart and could benefit by the critical mass achieved by a combination.
According to rating agency Nielsen, Bashas' and Albertsons rank fourth and fifth, respectively, in market share, with 13 percent and 6.5 percent of the Arizona grocery business. A combined chain would have almost 20 percent of the market and rank a solid third ahead of Safeway, which has 15 percent.
"We believe that this is an exciting opportunity to combine the operations and become an even stronger grocer in the Arizona market and provide even greater value to our customers," Wilcox said.
If Bashas' continues to resist the offer, Albertsons could try to gain the support of Bashas' secured creditors, which include several banks. Those creditors have not been as supportive of Bashas' reorganization plan as its unsecured claimants.
Bashas' submitted a tentative reorganization plan in January that proposed to pay off all of the company's approximately $300 million debts in installments.
Bashas' Tucson bankruptcy attorney Michael McGrath acknowledged that some of the secured creditors, who are owed $197 million, objected to the terms.
A Feb. 5 letter from Miller referenced meetings the companies held over the past year regarding a proposed merger.
The secured lenders say Bashas' never disclosed the discussions until Miller's letter forced its hand.
Bashas' filed for bankruptcy last year after being squeezed by competition, the recession and an ill-timed building spree. Since then, the company has closed 30 stores, reduced its workforce by more than 1,000 people and settled its long-standing dispute with the United Food and Commercial Workers Union Local 99.
Both Bashas' and Albertsons operate predominantly non-union stores.
Albertsons entered Arizona in 1989 along with Utah-based grocer Smith's. While Smith's was acquired by Fry's and gained needed critical mass, Albertsons has remained a relatively small player in what is known as one of the nation's most competitive grocery markets.
Albertsons LLC is majority-owned by Cerberus Capital Management and operates about 230 stores in Arizona, Arkansas, Colorado, Florida, Louisiana, New Mexico and Texas. It was created to acquire stores considered underperforming when a group led by SuperValu Inc. bought Albertsons Inc.
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