Safeway and Albertsons have announced an agreement under which AB Acquisition will acquire all outstanding shares of Safeway for just over $9 billion. The transaction is expected to close in the fourth quarter of 2014. Under certain circumstances, if the transaction fails to close, AB Acquisition would be required to pay Safeway $400 million.
AB Acquisition is the owner of Albertson’s LLC and New Albertson’s, Inc. and is controlled by a Cerberus Capital Management-led investor group, which also includes Kimco Realty, Klaff Realty, Lubert-Adler Partners and Schottenstein Stores.
Safeway is the 2nd-largest grocer in the US and Albertson’s is the 5th-largest grocer. Cerberus acquired Albertsons from SuperValu in January 2013 for $303 billion.
Safeway had sales of $36.1 billion in 2013. The company operates 1,335 stores in 20 states and the District of Columbia, 13 distribution centers and 20 manufacturing plants, and employs approximately 138,000 employees. The company’s common stock is traded on the New York Stock Exchange under the symbol SWY.
The combined operations Safeway and Albertsons creates a grocery store network that includes over 2,400 stores, 27 distribution facilities and 20 manufacturing plants with over 250,000 employees. No store closures are expected as a result of this transaction. Store name will include Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Albertsons, ACME, Jewel-Osco, Lucky, Shaw’s, Star Market, Super Saver, United Supermarkets, Market Street and Amigos. (www.safeway.com) (www.albertsons.com).
Bob Miller, Albertsons current Chief Executive Officer, will become Executive Chairman. Robert Edwards, Safeway’s current President and Chief Executive Officer, will become President and Chief Executive Officer of the combined company.
Cerberus Capital Management has approximately $20 billion of capital under management and invests in four primary strategies: distressed securities & assets; control and non-control private equity; commercial mid-market lending and real estate-related investments. The firm was founded in 1992 and is headquartered in New York (www.cerberuscapital.com).
AB Acquisition plans to fund the acquisition in part with debt financing of approximately $7.6 billion, equity contributions from its current investors of $1.25 billion, and cash on hand of Safeway. Safeway’s existing indebtedness is contemplated to be repaid at closing, other than capital leases and certain senior notes due from 2019 to 2031.
© 2014 PEPD • Private Equity’s Leading News Magazine • 3-7-14
