A number of buyout firms, including Cerberus Capital Management LP, may potentially be involved in a buyout deal with Safeway. Although Safeway is currently not running an auction, the company is aware of the buyout interest and is considering options with advisor Goldman Sachs Group Inc., according to Reuters.
Recently, Jana Partners LLC, a hedge-fund firm that presses for corporate change, acquired an approximate 6.2% position in Safeway, claiming that the company’s shares are undervalued. However, in response, Safeway adopted a one-year stockholder rights plan, or a “poison pill”, to prevent a hostile takeover. A “poison pill” allows the board to purchase shares at a discount, usually in the form of warrants or options, therefore diluting the hostile bidders’ shares and discouraging them from buying more and moving forward with takeover attempts.
This isn’t the first time Cerberus has acquired a grocery chain. In January, a Cerberus-led investor group acquired a group of grocery chains from Supervalu Inc., including Albertsons and Jewel-Osco for $3.3 billion. Prior to that transaction, Cerberus already 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., according to Reuters.
Similarly, this isn’t 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.
Although deliberations over a potential buyout at this time are still at an early stage, it remains unclear whether a bid will materialize for Safeway.
Stay tuned to DeliMarket TV as we continue coverage on Safeway's potential buyout.