PLEASANTON, CALIF. AND BOISE, IDAHO — Grocery store chains Albertsons and Safeway have agreed to merge in a $9 billion deal that will form a combined company with more than 2,400 stores nationwide. Following an expected close in the fourth quarter, the new entity will trail only Kroger (2,640) in number of locations.
AB Acquisition LLC, the owner of grocery store chain Albertsons, has agreed to purchase all outstanding shares of competitor Safeway. Cerberus Capital Management, which leads the investment group that controls AB Acquisition, plans to merge the two chains.
Safeway is currently the second-largest chain in the nation with 1,355 stores, while Albertsons ranks fifth with 1,075.
“This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions throughout the country,” says Bob Miller, CEO of Albertsons. “It also brings together two great organizations with talented management teams. 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.”
Further developments could be on the horizon, as the Albertsons-Safeway merger agreement includes a “go-shop” period, during which Safeway and its financial advisor Goldman Sachs will entertain alternative proposals. This period lasts for 21 days, after which Safeway may continue discussions regarding submitted proposals for 15 more days.
Forbes has reported that Kroger is considering making an offer to outbid AB Acquisition. For now, however, it seems as though the race for the grocery industry’s No. 1 spot will tighten as two of the top-five chains join together and approach the current leader.
“Safeway has been focused on better meeting shoppers’ diverse needs through local, relevant assortment, an improved price/value proposition and a great shopping experience,” says Robert Edwards, president and CEO of Safeway. “We are excited about continuing this momentum as a combined organization, and 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.”
Both companies have announced that the merger will result in no store closings, though executives acknowledged that the Federal Trade Commission could require divestitures. The combined chain will employ more than 250,000 workers.
Boise, Idaho-based Albertsons operates stores under 10 different brands, including Albertsons, Acme Markets, Jewel-Osco, Sav-On and Shaw’s and Star Market. Pleasanton, Calif.-based Safeway operates stores under seven different brands, including Safeway, Pavilions, Randalls, Tom Thumb and Vons.
This deal, which had been speculated for some time prior to the announcement, follows the $3.3 billion play by AB Acquisition LLC in early 2013, which brought together the Albertsons, Acme, Jewel-Osco, Shaw’s and Star and Sav-On together. Subsequently, Kroger purchased the Harris Teeter chain for $2.5 billion last summer.
— John McCurdy