Albertsons to acquire Safeway in $9.1 billion deal

Pleasanton, Calif. — Cerberus Capital Managament, which owns Albertsons, won the bid for Safeway.



Safeway and Albertsons on Thursday announced a definitive agreement under which AB Acquisition will acquire all outstanding shares of Safeway in a deal valued at more than $9.1 billion. The transaction is expected to close in the fourth quarter of this year.



The companies will operate independently until closing.



Bob Miller, who will be the executive chairman of the new company of more than 2,400 stores, said, "We intend on keeping the existing retail footprint of both companies." Safeway's Robert Edwards will serve as president and CEO of the new company. "This deal will create a substantial cost savings," Miller told reporters and analysts Thursday evening. "These are real savings that we will be able to pass along to our customers in lower prices." Miller also noted that the increased buying heft will benefit all banners operating under Albertsons and Safeway.



Shareholders will receive $32.50 per Safeway share in cash, $3.65 per share on the sale of Safeway's Mexican interest Casa Ley and other holdings and $3.90 per share with the distribution of Safeway's ownership interest in Blackhawk to Safeway shareholders. That distribution is expected to happen in mid-April.



The merger agreement was unanimously approved by the board of directors of Safeway. AB Acquisition is the owner of Albertson’s and New Albertson’s (collectively “Albertsons”), and is controlled by a Cerberus Capital Management-led investor group, which also includes Kimco Realty Corporation, Klaff Realty, Lubert-Adler Partners and Schottenstein Stores Corporation.



As a result of the merger, Safeway shareholders are expected to receive total value estimated at $40 per share.



Albertsons’ 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 Edwards, current president and CEO of Safeway. “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.”