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Cerberus-Led Consortium Plans To Merge Safeway And Albertsons In $9 Billion Deal

March 7, 2014

Grocery chains Safeway and Albertsons are set to merge, as a Cerberus Capital-led consortium, which already owns Albertsons, has agreed to acquire Safeway for $9 billion in a deal expected to close in the fourth quarter. Safeway’s board has accepted the offer, which equates to $40 a share. Cerberus and the other members of the consortium—Kimco Realty, Klaff Realty, Lubert-Adler Partners and Schottenstein Stores—plan to combine Albertsons’ 1,000 stores with Safeway’s more than 1,300 outlets, with no store closures planned. Bob Miller, current CEO of Albertsons, will become executive chairman of the combined group, with Safeway president and CEO Robert Edwards set to continue in that role in the merged entity.

The agreement between Safeway’s board and the consortium includes a “go-shop” period of 21 days, in which Safeway may actively solicit other offers, although a break-up fee would apply—$150 million if a different offer is accepted during the “go-shop” period, and $250 million thereafter. Fellow supermarket chain Kroger has been named as a potential counterbidder. Kroger successfully acquired another grocery chain, Harris Teeter, for $2.4 billion last year. Cerberus was also reportedly interested in Harris Teeter.

The proposed merger of Safeway and Albertsons—which continues the consolidation drive across the retail sector—is also subject to regulatory approval. Analysts estimate the merged Safeway and Albertsons will have revenues of around $60 billion. Kroger, the supermarket segment leader, has annual sales of nearly $100 billion.

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