Canadian food retailer Sobeys is to acquire Safeway Inc’s business in the country.
The deal will see Sobeys pay a cash price of C$5.8bn (US$5.69bn), plus the assumption of some liabilities.
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Sobeys will take on 213 grocery outlets run under the Safeway banner in western Canada, as well as other assets including 12 manufacturing plants and four distribution centres.
Canada’s second-largest retailer said the acquisition would give it “a new growth platform”. The company said it would be “a leading grocer in western Canada” and the number one food retailer in the “fast-growing market” of the province of Alberta.
Shares in Safeway enjoyed a rally in the early part of 2013 as the market speculated the retailer may sell off assets including its Canadian business. Safeway said the deal would be used to pay down US$2bn in debt.
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The enlarged Sobeys business would have pro-forma revenue of C$24bn. For the year to 23 March, Safeway’s Canadian business generated around C$6.7bn in sales and C$513m of adjusted EBITDA.
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By GlobalDataSobeys said it had identified “cost synergies” of around C$200m a year within three years through integrating distribution networks and reducing procurement, administration and marketing costs. The acquisition, which awaits regulatory clearance but is expected to close in the autumn, will be “immediately accretive”, Sobeys said.
Paul Sobey, president and CEO of the retailer’s parent company Empire Co., said yesterday (12 June) the deal was “a significant and historic event” for Sobeys. “The acquisition of Canada Safeway represents an excellent strategic fit,” he said.
Safeway president and CEO Robert Edwards added: “We are pleased to enter into this agreement with Sobeys in order to realise the higher multiples attributed to Canadian supermarket companies. 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.”
