Billionaire Steve Feinberg just went toe-to-toe with the labor unions — and he blinked.
The secretive boss of Cerberus Capital Management — the buyout fund that owns grocery giant Albertsons — has made surprise concessions in a deal with the US government, agreeing to pay $575 million to shore up a massive, troubled pension plan covering some 50,000 supermarket workers, sources said.
Under the first-of-its-kind agreement, the grocer starting next year will begin paying $23 million a year for 25 years to the Pension Benefit Guaranty Corp. to fund the nest eggs of tens of thousands of grocery workers in the mid-Atlantic region, according to sources and regulatory filings.
The deal — a shocker for watchers of Feinberg, who has been criticized in the past for federal bailouts of his botched investments in Chrysler and GMAC — comes as Albertsons on Friday filed for an initial public offering.
Now, Albertsons will be paying $19 million more per year in DC area pension contributions, a union spokesman said, declining to provide details.
Albertsons’ IPO filing said it expects to “record a material increase” to its pension-related liabilities in its first quarter as a result of the agreement.
The costly pension concessions are aimed at resolving the supermarket’s lengthy dispute with the United Food and Commercial Workers Union. The union had argued Albertsons’ pension obligations extend to retirees beyond its Safeway stores in the Washington, DC area, which employ about 10,000.
Albertsons, the union argued, is also on the hook to help support another 40,000 workers at now-defunct chains in the region such as Food Fair and Grand Union that are in the same multi-employer pension plan.
The $575 million payout covering all 50,000 workers from differing supermarkets eclipses the $131 million in net income Albertsons made in fiscal 2018 on $61 billion in sales, insiders noted.
The increased pension costs represent 15 percent of net income.
After union officials were briefed on the deal, employees at 112 Albertsons-owned Safeway supermarkets in Washington DC, Maryland and Virginia voted Thursday to approve a new contract that includes increased wages and pension contributions.
Now underfunded by $1.7 billion, the group pension plan is projected to go bust by 2021.
The deal represents a change of heart for Albertsons, which has been an albatross for Cerberus since the buyout fund acquired it in 2006.
In January, an Albertsons spokeswoman had insisted that the supermarket chain wouldn’t pay the unfunded amount of the pension plan in addition to its ongoing contributions.
“That is neither required by law nor by any agreement we have with the union,” the spokeswoman said.
On Friday, the Albertsons spokeswoman said, “We do not comment on the details of collective bargaining agreements.”
It has also agreed to help fund pensions for workers at their full benefit levels beyond the $12,800 annual maximum the government pays workers in insolvent multi-employer plans.
Albertsons, which hasn’t yet revealed how much it intends to raise in its NYSE stock debut, has also agreed to make larger pension contributions in recent months to workers in Northern and Southern California, a source said.
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