March 6 Safeway Inc, the second-largest
U.S. mainstream grocery store operator, said private equity firm
Cerberus Capital Management would acquire the company in a deal
valued at about $9.4 billion.
The offer price of $40 per share represents a premium of 1.3
percent to Safeway's Thursday closing stock price of $39.47 on
the New York Stock Exchange.
The deal combines Safeway with Cerberus' Albertsons chain,
creating a dominant grocery franchise on the West Coast. It also
creates a grocery network of more than 2,400 stores and 250,000
No store closures are expected, according to the company.
Safeway shareholders will receive $32.50 per share in cash
plus other distributions with a value of $3.65 per share.
Cerberus is a seasoned investor in the supermarket sector.
Last March, a Cerberus-led investor group acquired a group of
grocery chains from Supervalu Inc, including Albertsons and
Jewel-Osco, for $3.3 billion.
Cerberus previously owned 650 Albertsons locations as a
result of a 2006 deal under which the chain was acquired and its
stores broken up between the private equity investor, Supervalu
and CVS Caremark Corp.
Safeway has been in the hands of private equity before. KKR
& Co LP took Safeway private in 1986, and then sold its
stake in 1999.
Safeway has been trying to streamline its business by
selling off non-core units. Last year, it spun off its gift card
provider, Blackhawk Network Holdings Inc, into a
separate publicly traded company.
It also sold off its Canadian business to the operator of
Canadian retailer Sobeys for $5.8 billion in cash.
More recently, Safeway has revealed plans to leave the
Chicago market by early this year. That announcement came after
activist investor Jana Partners pressured the company to review
strategic alternatives, including exiting weak markets.
Reuters first reported that Cerberus was exploring a buyout
of Safeway last October.
Goldman Sachs Group Inc and Greenhill & Co Inc
advised Safeway on the transaction. Latham & Watkins LLP
served as outside counsel.
Citigroup Inc, Bank of America Corp and Credit
Suisse AG advised Albertsons, Cerberus and its investor