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 The offer price of $40 per share represents a premium of 1.3 percent
to Safeway's Thursday closing stock price of $39.47 on the New York
Stock Exchange.
The deal combines Safeway with Cerberus' Albertsons chain, creating
a dominant grocery franchise on the West Coast. It also creates a
grocery network of more than 2,400 stores and 250,000 employees.
No store closures are expected, according to the company.
Safeway shareholders will receive $32.50 per share in cash plus
other distributions with a value of $3.65 per share.
Cerberus is a seasoned investor in the supermarket sector. Last
March, a Cerberus-led investor group acquired a group of grocery
chains from Supervalu Inc, including Albertsons and Jewel-Osco, for
$3.3 billion.
Cerberus previously 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.
Safeway has been in the hands of private equity before. KKR & Co LP
<KKR.N> took Safeway private in 1986, and then sold its stake in
1999.
Safeway has been trying to streamline its business by selling off
non-core units. Last year, it spun off its gift card provider,
Blackhawk Network Holdings Inc <HAWK.O>, into a separate publicly
traded company.
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It also sold off its Canadian business to the operator of Canadian
retailer Sobeys for $5.8 billion in cash.
More recently, Safeway has 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.
Reuters first reported that Cerberus was exploring a buyout of
Safeway last October.
Goldman Sachs Group Inc <GS.N> and Greenhill & Co Inc <GHL.N>
advised Safeway on the transaction. Latham & Watkins LLP served as
outside counsel.
Citigroup Inc <C.N>, Bank of America Corp <BAC.N> and Credit Suisse
AG <MLPN.P> advised Albertsons, Cerberus and its investor group.
(Reporting by Siddharth Cavale in
Bangalore; editing by Saumyadeb Chakrabarty and Jan Paschal)
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