Haggen has filed for bankruptcy protection, blaming its takeover of 146 stores from rival supermarket chain Albertsons, and plans to reorganize around its profitable locations. The West Coast regional grocer replaced its executive after failing to win over shoppers, according to Los Angeles Times.
Haggen, based in Washington state, sued Albertsons last week for damages that it said could exceed $1 billion, alleging its rival had failed to adhere to the terms of a $300 million purchase agreement for the stores it bought last year.
Albertsons, the second-largest U.S. grocer, is preparing for an initial public offering. It has said Haggen’s allegations are “without merit” and that it would fight Haggen in court.
Haggen’s bankruptcy is a sign that its ambitions exceeded its ability to absorb all the stores it acquired from Albertsons, said David Livingston of DJL Research, which specializes in supermarket industry analysis.
“They just bit off more than they could chew,” Livingston said. “They didn’t have the wherewithal to operate a chain that size.”
With its purchase of 146 Albertsons-owned locations in December, Haggen grew to 164 stores with nearly 11,000 employees spread across five states.
Haggen’s filing follows the Chapter 11 by another major chain, the Northeast-based Great Atlantic & Pacific Tea Co, or A&P.
The 156-year-old A&P, once America’s largest grocer, has struggled with growing competition from warehouse clubs and drug, convenience and “dollar” stores, as well as online prescription processors. It was A&P’s second trip to bankruptcy in five years.
Haggen’s lawsuit alleges that after it purchased the stores, Albertsons sought to eliminate Haggen as a viable competitor in over 130 markets.
Haggen also claimed Albertsons sought it out to gain the backing of the Federal Trade Commission for a merger between Albertsons and Safeway.
Haggen said it was forced to close 26 of the stores it acquired from Albertsons, which received antitrust approval in January for its $9.2 billion merger with Safeway.
In its Chapter 11 petition filed in U.S. Bankruptcy Court in Wilmington, Delaware, Haggen estimated it had less than $50 million in liabilities and assets of between $50 million to $100 million.
It has hired Sagent Advisors to sell locations and said it is already in talks with interested parties on other assets.