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Vons, Allied Supermarkets Call Off Merger

October 24, 1986

EL MONTE, Calif. (AP) _ Allied Supermarkets Inc., one of the largest retail and food marketers in the Detroit area, and Vons Grocery Co. have called off a month-old, $660 million merger plan.

But the companies, which announced Thursday that the deal was canceled, declined to give specifics on the plan’s collapse.

″There are a thousand things that have to be negotiated between the time you sign a letter of intent and the time a deal is completed,″ Allied’s chairman and chief executive, David K. Page, said in a telephone interview.

″We ultimately decided it wasn’t as interesting as in the beginning, so we decided to go our separate ways and not get married,″ Page said.

The merger would have created a new holding company, with Vons and Allied continuing to operate independently under that umbrella. Vons has annual sales of about $3 billion a year, while Allied’s amount to less than $400 million.

Lon Makanoff, Allied’s president and chief operating officer, said financing was no problem.

″There were a lot of small issues,″ Makanoff said. ″In order to make it work, each side would have had to make more compromises in its business philosophies than it wanted.″

Gary Nelson, senior vice president for administration of Vons, offered a similar analysis.

He said both companies were enthusiastic about the proposed merger initially as a means to provide both with more resources to fund their respective expansion plans.

But he said that as officials ″looked more closely at the Detroit market and the companies’ strategic plans, it just wasn’t a good fit.″

Nelson said the proposal was presented to Vons’ board Wednesday in Chicago with a recommendation that it be rejected, and the board concurred.

Makanoff said Allied now will dust off acquisition plans it shelved after announcing last month’s agreement with Vons.

He noted that Allied previously arranged a $100 million line of credit to finance acquisitions, adding that the company now ″will reactivate a number of those things we were looking at earlier.″

He said an acquisition wouldn’t necessarily be limited to the Michigan area the company now serves.

Vons’ chief financial officer, Mike Henn, said the El Monte-based company wasn’t seeking to line up another acquisition at this time.

The company, which converted to private ownership in January, has a substantial debt.

The proposed merger had puzzled the supermarket industry. Although Allied has much smaller sales, its shareholders would have held two-thirds of the merged company; each would have had six board members.

Vons has 190 supermarkets and drug retailing outlets in Southern California and Nevada and 18,000 employees.

Allied operates 23 markets principally under the Great Scott name as well as one drugstore and the Abner Wolf wholesale grocery company, and has 1,700 employees.

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