Albertsons, Safeway may merge in $9B deal
Each of the grocery store chains has 10 Wyoming locations in eight Wyoming cities, though the cities vary from one another between the chains. The merger agreement signed yesterday and expected to close in the fourth quarter would take the publicly traded Safeway and make it a private company, as Albertsons is.
It appears that both chains of stores will retain their names, and the companies don't expect any store closures after the merger. However, an official during a Safeway investor conference call said the Federal Trade Commission could require certain "divestitures" that wouldn't be considered "closures" in order to approve the deal under antitrust laws.
"There is clear and compelling rationale for this merger," said Safeway CEO Robert Edwards during the call. "It will allow our two companies to compete more effectively and efficiently in meeting customers' changing needs in an increasingly competitive landscape."
Safeway is the second-largest grocery store chain in the U.S., and merging with Albertsons, the fifth-largest chain, will create a total network of 2,400 stores, 27 distribution facilities and 20 manufacturing plants with about 250,000 employees.
The deal, though signed, allows for competing superior offers, though any company desiring to acquire Safeway would have to pay a $150 million to $250 million premium to break up the deal with Albertsons parent Cerberus Capital Management. Cerberus last year bought Albertsons from SuperValu.
Forbes reported that rival chain Kroger – the largest in the U.S. with nearly double the revenue of Safeway – may make its own bid, though Kroger officials have declined to comment on the possibility.
The boards of both Albertsons and Safeway unanimously approved the merger, with Edwards repeatedly mentioning the synergy that will come from combining forces. And that, officials said, could drive down prices at both chains.
This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country," Albertsons Chief Executive Officer Bob Miller stated. He will become the combined company's executive chairman. "Working together will enable us to create cost savings that translate into price reductions for our customers."
Edwards, for his part, will maintain the CEO role once the companies merge.
"I'm optimistic about the future of the combined company," he said.
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