Merger should not affect local Safeway
March 20, 2014
A proposed merger between Albertsons and the nation’s second-largest grocery chain should have no bearing on future operations for three Safeway stores in Fallon, Lovelock and Hawthorne, said a spokesperson for Albertsons on Thursday.
Albertsons’ parent, AB Acquisition LLC, a unit of an investor group led by New York private-equity firm Cerberus Capital Management, will acquire all outstanding shares of Safeway for $9 billion, the companies recently announced in a joint press release.
The acquisition, said the spokesperson, is expected to close in the fourth quarter of this year. Albertsons’ parent company must pay Safeway $400 million if the merger fails.
Safeway CEO Robert Edwards will become the CEO of the new combined chain. Bob Miller, Albertsons CEO, will become executive chairman.
“Working together will enable us to create cost savings that translate into price reductions for our customers,” Miller said. “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.”
Albertsons said the central Nevada stores should expect no changes and will operate under the Safeway banner; however, the spokesperson said Albertsons discontinued its grocers’ discount card about one year ago.
The Fallon store first came to the area in the late 1920s and has occupied buildings that now house the Churchill County Museum and CVS Drug Store. The current store opened at its current location on West Williams Avenue in late 1995.
The merger will create a diversified network that includes more than 2,400 stores, 27 distribution facilities and 20 manufacturing plants with more than 250,000 employees. No store closures are expected as a result of this transaction. The merger between the two grocery-chain giants, though, dispels earlier rumors that Smith’s was poised to take over the local Safeway stores.
Safeway shareholders will receive $40 per share in the deal, slightly above the stock’s recent trading price, though Edwards noted that the price is 56 percent higher than Safeway’s share price six months ago. When shares closed at $39.47 on the day of the merger announcement, Safeway’s value came in at about $9 billion.
With traditional grocers continuing to struggle nationwide, Safeway, based in Pleasanton, Calif., put itself up for sale last month. Analysts and industry watchers said a Safeway sale would reshape the industry, leading to the closure of stores across California and the Southwest and transforming Safeway into a neighborhood grocer that more closely resembles Trader Joe’s.
According to the press release, 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. Some in the industry, however, look at the merger as a way to compete better with Walmart.
“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,” Edwards said. “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.”