Safeway has agreed to be acquired by an investment group
led by Cerberus Capital Management, the owner several supermarket
chains.
The acquisition is worth about $7.64 billion in cash, and pending other transactions could top more than
$9 billion.
The
deal, announced late Thursday, will bring together Safeway and
Albertsons. Cerberus last year had bought the Albertsons stores it
didn’t already own from Supvalu Inc., along with four other Supervalu
chains.
It comes amid ongoing consolidation in the supermarket
industry, which is facing growing competition from big-box retailers,
specialty chains, drug stores and even dollar stores. Kroger Co., a key
competitor, recently snapped up regional chain Harris Teeter.
Safeway
said in February that it was looking into putting itself up for sale.
The Pleasanton, Calif.-based company has been trying to adapt for some
time to increased competition and recently shed some of its smaller,
less profitable units, such as its Canadian operations and Dominick’s
stores in Chicago.
The company has more than 1,300 U.S. locations
under banners including Safeway, Vons, Pavilion’s, Randall’s, Tom Thumb
and Carrs.
AB Acquisition LLC, which operates Albertsons, along
with Acme, Jewel-Osco, Lucky, Shaw’s and other stores, is owned by
Cerberus and other investors. It operates more than 1,000 stores.
Albertsons is based in Boise, Idaho.
Combined, the companies will have more than 2,400 stores, 27 distribution facilities and 20 manufacturing
plants.
Safeway
and Albertsons say the deal will allow them to better respond to
customer needs and lower costs. They also expect to refurbish some
stores and expand its product offerings once it is complete.
The
deal is expected to close in final three months of this year. It still
needs the approval of Safeway shareholders and federal regulators.
Safeway
shareholders will receive $32.50 per share in cash. Pending other
actions, the company says the deal is worth roughly $40 per share to
stockholders.
Shares of Safeway Inc. closed at $39.47 Thursday.
Its shares closed at $34.10 on February 18, the day before Safeway
announced it was in talks regarding a potential sale.
The stock fell $1.33, or more than 3 percent, to $38.14 in extended trading after the deal was announced
Thursday.
Bob
Miller, the current CEO of Albertsons, will become executive chairman
of the combined business. Robert Edwards, Safeway’s president and CEO,
will become president and CEO of the combined company.
The
companies said it is too early to determine where it will be based and
exactly what its operations will look like following the deal. It does
not anticipate any store closings.
Safeway can still actively review other proposals in the coming weeks.
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