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Borman’s to Buy Safeway Division

March 5, 1987 GMT

DETROIT (AP) _ Safeway Stores Inc. of Oakland, Calif. will sell 60 supermarkets to Borman’s Inc. for an unspecified price under a preliminary agreement announced by the grocery chains.

The transaction, announced Wednesday, would be Safeway’s first major domestic sale since it escaped a hostile takeover attempt last year through a $4.3 billion buyout.

The purchase of Safeway’s Salt Lake City Division would nearly double the size of Borman’s.

″We’re a strong company right now, doing business in the most competitive marketplace in supermarketing in the United States, and the opportunity for geographical diversification makes a lot of sense,″ said Gilbert Borman, spokesman for Borman’s.

Conclusion of the deal depends on financing and negotiation of a final contract, and on renegotiation of labor agreements ″to provide Borman’s with substantial labor savings,″ the companies said.

Borman declined to comment on how much the company would have to save on its labor contracts in order to operate successfully.

The Salt Lake City Division, which includes 60 supermarkets in five states, most of them in Utah, Idaho and Wyoming, recorded $350 million in sales in the year ending Jan. 3.

Borman’s operates 83 Farmer Jack supermarkets, mostly in the greater Detroit area. The family-controlled company’s stock is publicly traded.

Safeway, the nation’s largest supermarket chain, said at the time of the buyout it would keep six of its 15 domestic divisions and left open the possibility of selling the rest, according to Robert Bradford, Safeway spokesman in Oakland.

″In the keeper divisions, we are working to maintain labor-cost parity with our competitors - we’re union, everywhere we operate,″ Bradford said.

″As part of our restructuring, we’re looking very carefully at the divisions that are not in the six keeper division categories, to determine what will be the best utilization of our assets.″

Safeway earlier sold its West German, Australian and United Kingdom holdings to reduce $5.5 billion in debt resulting from the November buyout by its management and a New York investment company, Kohlberg Kravis Roberts & Co.

The buyout was put together to escape a takeover by Dart Group Corp. of Landover, Md.