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Safeway, Albertson’s announce merger agreement

March 7, 2014
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Safeway Inc. and Albertsons announced a definitive agreement under which AB Acquisition LLC will acquire all outstanding shares of Safeway. The merger agreement was unanimously approved by the Board of Directors of Safeway. AB Acquisition is the owner of Albertson's LLC and New Albertson's Inc. and is controlled by a Cerberus Capital Management, L.P. -led investor group, which also includes Kimco Realty Corporation,  Klaff Realty LP, Lubert-Adler Partners LP, and Schottenstein Stores Corporation.

As a result of the Merger, plus other actions to be taken by the Safeway Board of Directors as described below, including the separate sales of certain other primarily non-core assets, and the distribution of Blackhawk shares, Safeway shareholders are expected to receive total value estimated at $40 per share.

Albertsons' Chief Executive Officer Bob Miller stated, "This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country. It also brings together two great organizations with talented management teams. Robert Edwards and his team have done an outstanding job in positioning Safeway's core business for success, by investing in its stores and creating innovative strategic marketing programs that contribute to shareholder value. Working together will enable us to create cost savings that translate into price reductions for our customers. Together, we will be able to respond to local needs more quickly and deliver outstanding products at the lowest possible price, more efficiently than ever before."

"This Merger is one of several actions we have taken in recent months as a result of our strategic business review.  The combined value of the transactions described above is expected to deliver a premium to Safeway's shareholders of 72% from one year ago, and 56% over the share price six months ago," said Robert Edwards, President & Chief Executive Officer of Safeway Inc. "Safeway has been focused on better meeting shoppers' diverse needs through local, relevant assortment, an improved price/value proposition and a great shopping experience that has driven improved sales trends.  We are excited about continuing this momentum as a combined organization. We look forward to working with Bob Miller and the rest of the Albertsons team as we proceed together on a path towards becoming an even stronger organization."

Under the merger agreement, Safeway shareholders will receive $32.50 per share in cash.  Additionally, shareholders will have the right to receive pro-rata distributions of net proceeds from primarily non-core assets with an estimated value of $3.65 per share.

The Merger will create a diversified network that includes over 2,400 stores, 27 distribution facilities and 20 manufacturing plants with over 250,000 dedicated and loyal employees.  No store closures are expected as a result of this transaction.

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.  

Banners 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.

The Merger will enable Albertsons and Safeway to implement operational best practices in order to offer customers an enhanced shopping experience and more competitive prices, while enabling the combined company to pursue industry-leading customer service in an increasingly competitive and dynamic marketplace. Realizing substantial cost savings will allow for investments that are expected to benefit customers, including price reductions as well as store remodels and refurbishments.  The diversified network of retail assets, associated distribution centers and manufacturing assets will allow for a broader assortment of products, a more efficient distribution and supply chain, enhanced fresh and perishable offerings, and expanded private label alternatives for customers.

"Albertsons has successfully transformed underperforming retail grocery stores into strong performers by focusing on enhancing the local customer experience," said Lenard Tessler, Co-Head of Global Private Equity and Senior Managing Director at Cerberus. "Similarly, Safeway has consistently provided outstanding value and customer service throughout the communities it serves.  Combining these strong management teams will strengthen the ability of Safeway and Albertsons to deliver on a shared commitment to offering customers higher quality products at lower prices, which will undoubtedly yield positive results for all stakeholders in the business."

The Merger is expected to close in the fourth quarter of 2014 following the satisfaction of customary closing conditions, including approval of the Merger by the holders of a majority of the outstanding shares of Safeway common stock and regulatory approvals including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Under certain circumstances, if the Merger fails to close, AB Acquisition would be required to pay Safeway $400 million.

Source: Safeway

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