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Safeway Considers Possible Sale of the Company

Safeway Considers Possible Sale of the Company


PLEASANTON, CA Safeway has confirmed in its latest Q4 2013 earnings report that it has been involved in discussions with various buyout firms including Cerberus Capital Management LP, CVC Capital Partners Ltd., and Leonard Green & Partners LP relating to a potential sale of the entire company. The retailer has not yet reached any final agreement, nor will these discussions ensure a sale. A press release from the company states, “Although the discussions are ongoing, the company has not reached an agreement on a transaction, and there can be no assurance that these discussions will lead to an agreement or a completed transaction. The company will not comment further on these discussions at this time.” Safeway has already been involved in various sales over the past year, including selling divisions in Canada and Chicago. “We are pleased with the progress we made in 2013,” said Robert Edwards, President and CEO. “Strategies to grow sales and improve operating profit dollars have begun to produce results. In 2013, we generated our best volume growth since 2006, and we had our best identical-store sales growth in the last five years.” In its earnings release, Safeway also announced it will be distributing the remaining 37.8 million shares it owns of Blackhawk Network Holdings (approximately 72.2% of the outstanding Blackhawk shares) to Safeway stockholders. In addition, Safeway will monetize its investment in Casa Ley, the fifth largest food and general merchandise retailer in Mexico based on sales. It’s possible that these buyout firms will take the company private, but it appears that they may be more interested in buying out locations in certain areas, such as California. Safeway is considering options with advisor Goldman Sachs Group Inc. Leonard Green and CVC, which hold BJ’s Wholesale Club in a joint-ownership, may partner to discuss a deal with Safeway as well, Bloomberg reports. Cerberus previously acquired grocery chains from Supervalu, including Albertsons and Jewel-Osco for $3.3 billion. This wouldn’t be the first time Safeway has been owned by a private equity. KKR took Safeway private in 1986, and then sold its stake in 1999 to make more than $7 billion on its original investment. For Q4 2013, Safeway reported its net earnings at $100 million from $170.7 million in Q4 2012. Sales and other revenue was $11.3 billion from $11.2 billion in Q4 2012. Safeway’s shares jumped $1.19 or 3.5% to $35.81 as of 1:15 pm EST on Thursday. In after-hours trading at the close of the NYSE, Safeway was up approximately $0.51 or 1.5% to $34.61 just hours after the company announced it was in discussions with various buyout firms regarding a potential sale. Stay tuned to DeliMarket TV as we continue our coverage on the potential sale of Safeway. Bloomberg Safeway
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