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Albertson's To Buy American Stores

Supermarket giant Albertson's, Inc., will buy American Stores Co. for $11.7 billion, creating what the companies say will be the largest food and drug chain in the United States.

The new company, which will be called Albertson's, will operate more than 2,470 stores with 218,000 employees in 37 states. It expects 1998 annual sales to top $36 billion.

The merger brings together two of the biggest names in food and drug retailing. Albertson's operates 916 supermarkets, while American Stores, based in Salt Lake City, operates 1,558 stores, under the Acme Markets, Jewel Food Stores, Lucky Stores, Osco Drug and Sav-on names.

Albertson's corporate headquarters will remain in Boise, Idaho. Albertson's intends to retain both companies' current store names, although the names of individual stores may change, depending on their size, location and other factors.

"At a time when the supermarket industry is under increasing pressure to enhance value to customers through cost effective operations, this merger has been designed to assist us in continuing to provide superior value and service to our customers and compete successfully in today's marketplace," said Gary G. Michael, chairman and chief executive officer of Albertson's,

The transaction, which is expected to close in early 1999, has a total value of approximately $11.7 billion, consisting of $8.3 billion in stock and $3.4 billion in debt.

Under the terms of the transaction, American Stores shareholders will receive 0.63 shares of Albertson's stock for each share of American Stores stock they own.

Based upon Albertson's closing stock price of $48.00 per share on July 31, 1998, the transaction has a value of $30.24 per share for American shareholders. Following closing of the merger, American Stores Company shareholders would own 41.3 percent of Albertson's.

Upon completion of the merger, Michael will continue as chairman and CEO. Victor L. Lund, chairman and chief executive officer of American Stores, will serve as vice chairman of the combined company.

Following the merger, Albertson's expects to record significant one-time charges in connection with the combination. The magnitude of the one-time charges has not yet been determined.