Dominicks/pettersson/6″/mike1st/mark2nd

No. 29

Yucaipa Sells Dominick’s

Few, if any, Angelenos drive a harder bargain than Ronald Burkle, and Safeway Inc. learned that first-hand last year.

Burkle’s L.A.-based holding company, Yucaipa Cos., in partnership with Apollo Advisors, agreed in October to sell their jointly owned 41 percent stake in Dominick’s Supermarket Inc. to Safeway. Dominick’s is the second-largest grocery chain in Chicago.

For that stake plus the 59 percent stake owned by the public, Safeway is paying about $1.2 billion roughly 10 times Dominick’s earnings before interest, taxes, depreciation, and amortization.

The norm for recent supermarket deals has been around 8.5 times annual EBITDA.

The premium was classic Burkle. Industry insiders at the time suggested that the steep price Safeway paid for Dominick’s was the result of a bidding war. Dealmakers like Burkle love to orchestrate such wars whenever they sell assets, because it tends to drive up the price. Although Yucaipa and Safeway officials declined to confirm the reports, industry insiders said Kroger Inc. was the other main bidder for Dominick’s.

Burkle did not shun Kroger for long. Shortly after Yucaipa sold its stake in Dominick’s, Fred Meyer Inc. (an even larger grocery chain controlled by Burkle) agreed to be acquired by Kroger, creating the nation’s largest supermarket chain with $43 billion in annual sales.

Edvard Pettersson