By Dhanya Skariachan and Greg Roumeliotis
NEW YORK Feb 19 Safeway Inc, the
second-largest U.S. mainstream grocery store operator, said on
Wednesday it is in talks about a possible sale of the company.
A handful of buyout firms, including Cerberus Capital
Management LP, have been exploring a deal for all or
part of Safeway, Reuters reported in October.
Cerberus is currently in talks with Safeway about a possible
transaction, a person familiar with the matter told Reuters on
The source asked not to be identified because the talks are
private. A Safeway spokesperson could not immediately be reached
for comment on the talks with Cerberus. Cerberus declined to
Wednesday's news comes as the operator of chains such as
Safeway, Vons and Dominick's tries to fend off tough competition
in the grocery aisle from traditional players such as Kroger Co
, warehouse club Costco Wholesale, discounter
Wal-Mart Stores Inc and dollar stores.
The company had also been pressured by activist investor
Jana Partners to review strategic alternatives.
Safeway shares trade at about 19.9 times forward earnings,
while the larger grocery sector trades at a multiple of 15.2.
The stock was up 4.3 percent at $36.10 in after-hours trading.
On a conference call, Safeway's Chief Executive Officer,
Robert Edwards, declined to give more details on a potential
buyout and said he will update investors and analysts on the
progress of the related talks at the "appropriate time."
Safeway was in the hands of private equity before. KKR & Co
LP took Safeway private in 1986, and then sold its stake
in 1999 to make more than $7 billion on its original investment.
PRESSURE TO REVIEW ALTERNATIVES
Safeway has been trying to streamline its business by
selling off non-core units. It spun off its gift card provider,
Blackhawk Network Holdings Inc, into a separate
publicly traded company, selling a 19 percent stake.
It also sold off its Canadian operations to Empire Co Ltd
, the operator of Canadian retailer Sobeys, for $5.8
billion in cash.
Last fall, Safeway also 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.
Safeway said on Wednesday it has decided to distribute the
remaining 37.8 million shares it owns of Blackhawk Network to
Safeway shareholders. It also said "it is an appropriate time"
to explore alternatives for its 49 percent stake in Casa Ley,
the fifth-largest food and general merchandise chain in Mexico.
Safeway also reported a better-than-expected profit in the
fourth quarter on Wednesday.
Net earnings from continuing operations fell to $100
million, or 35 cents a share, for the fourth quarter, from
$170.7 million, or 71 cents a share, a year earlier.
Excluding items, it earned 53 cents a share, beating the
analysts' average estimate of 48 cents a share, according to
Thomson Reuters I/B/E/S.