Alpha Beta Stores Sold to Boys, Viva Markets Owner : Economy: Buying 145 locations for $248 million puts Yucaipa Cos. among Southland’s biggest grocery firms.

In a deal expected to heat up price battles among Southern California’s supermarkets, the owner of Viva and Boys markets said Friday that it agreed to buy 145 Alpha Beta stores for about $248 million.

The buyer, Yucaipa Cos. of Claremont, now will challenge Ralphs Grocery Co. for the No. 3 spot among the Southland’s biggest grocery operators.

Under the deal, Yucaipa’s Food 4 Less Supermarkets unit would more than double in size to become an organization with about 215 stores, 22,000 employees and $3 billion in annual sales in the southern half of the state.

Yucaipa’s acquisition also would mark the final chapter of an antitrust case brought by the state attorney general’s office after Alpha Beta’s current owner, American Stores, bought the rival Lucky Stores chain in 1988 for $2.5 billion. As part of a settlement reached last May, Salt Lake City-based American Stores agreed to sell most of its Alpha Beta locations.

The deal announced Friday, which is expected to close in July, calls for Yucaipa to buy all 145 Alpha Beta stores in the five-county Los Angeles area and in Kern and Santa Barbara counties. Another 15 Alpha Beta stores in San Diego County will be excluded from the purchase, and will be converted into Lucky Stores.

Although the initial settlement with the attorney general’s office required American Stores to sell the San Diego locations, state officials have agreed to waive that requirement to clear the way for the Yucaipa deal.

The state successfully contested American Stores’ plans to merge Lucky and Alpha Beta, which would have created Southern California’s biggest supermarket chain, by arguing that the reduced competition would cost consumers $200 million a year in higher prices.

H. Chester Horn Jr., deputy attorney general, said the deal will “restore the competitive balance that existed before American Stores bought Lucky. That should mean more competition among the stores and lower prices for consumers.”

Supermarket industry analysts agreed that price competition should intensify in the Southland. They said that the owners of the area’s top four chains--Vons, Lucky, Ralphs and Alpha Beta--have been more absorbed with reducing their heavy debt burdens than trying to take customers from competitors’ stores.

“The marketplace had settled down and no one was interested in fighting over the last few years,” said Sid Doolittle, a retailing consultant. “The consumer could take note of a little more aggressive pricing.”

Edward F. Comeau, an analyst with Oppenheimer & Co. in New York, said debt-laden American Stores had been reluctant to invest heavily in Lucky or its aging Alpha Beta stores until it became clear how the antitrust case would be resolved. With fresh cash from the Alpha Beta deal and divestitures in other parts of the country, American Stores should have the money to improve its Lucky stores.

Ron Burkle, managing director of Yucaipa, said that the Alpha Beta stores also would be revitalized. He said he expects to open new stores in coming years and to spend more than $100 million over the next 2 1/2 years refurbishing existing locations.

Most of the current stores, he said, would continue to operate under the Alpha Beta name. The others would be brought into some of Yucaipa’s six current grocery chains in the Southland: Boys Markets, Viva, Market Basket, ABC, Food 4 Less and Marina Market.

Yucaipa’s biggest chains in the Southland, Boys and Viva, mainly are located in minority neighborhoods. Given the growing Latino population in the area, some Alpha Beta stores in coming years probably will be converted into Latino-oriented Viva markets, Burkle said.

Burkle said a key reason he pursued the Alpha Beta deal was to gain access to the company’s 1.5-million-square-foot distribution center in La Habra, which will be used by all of Yucaipa’s Southern California stores.

Company officials said Yucaipa has outgrown its existing warehouse, putting the company at a competitive disadvantage.

As part of the Alpha Beta deal, Yucaipa can lease the distribution center for up to 25 years. Yucaipa will have the option, however, of buying the warehouse and other real estate holdings for $70 million over the next five years.

Burkle said he plans to buy that property, but is waiting for a time when a real estate deal could be financed less expensively.

He discounted concerns that the acquisition of Alpha Beta, which industry sources say has posted weak profits in recent years, will burden Yucaipa with excessive debt. Burkle said Yucaipa will prosper by investing in Alpha Beta and improving its cash flow as it increases the efficiency of its other Southern California chains with the Alpha Beta warehouse.

“It’s a strategic acquisition,” Burkle said. “It’s not a leveraged buyout. But we do expect it (Alpha Beta) to be more profitable in the future, and to be more profitable you have to have first-class stores.”

In addition to its Southern California supermarkets, privately held Yucaipa owns stores in the Midwest and New England.

Among those pleased with the deal was Rick Icaza, president of the United Food and Commercial Workers, Local 770, in Los Angeles. Icaza said he was “relieved” that the Alpha Beta stores were bought by a unionized company.

Yucaipa will make its acquisition, which was anticipated in the industry, by paying $237 million in cash and by assuming leases valued at $11 million.

With about 215 Southern California stores after the acquisition, Yucaipa would have more supermarkets here than every company but Vons and Lucky. Vons has about 320 stores and Lucky has 225.

In annual revenue, Ralphs would be roughly equal with the merged Yucaipa organization with sales of nearly $3 billion.