Safeway exits Canada, sells to Sobeys

The Canadian retail landscape shifted again late Wednesday when Safeway announced the sale of its operations there to Sobeys Inc. for $5.8 billion.

The all cash deal will result in net proceeds to Safeway of about $2 billion which will be used to pay down debt. Sobey’s is a Canadian food retailer and a wholly owned subsidiary of Empire Company Limited. It is acquiring Safeway’s 223 store operation and 12 manufacturing facilities that last year generated sales of $6.7 billion in Canadian dollars and a $428 million operating profit.

"We are pleased to enter into this agreement with Sobeys in order to realize the higher multiples attributed to Canadian supermarket companies," said Robert Edwards, president and CEO of Safeway. "The substantial cash proceeds from this transaction will allow us to create value for Safeway stakeholders and contribute to the growth of the ongoing business."

Safeway currently operates 1,415 U.S. stores and 20 manufacturing facilities and last year generated sales of $37.5 billion.

The deal has been approved by the boards of both companies, but it must pass muster with Canada’s Competition Act and is expected to close during the fourth quarter.