Cerberus Capital to Acquire Safeway in $9.4B Deal
Safeway and Albertsons announced a definitive agreement under which AB Acquisition, the owner of Albertsons and controlled by a Cerberus Capital Management-led investor group, will acquire all outstanding shares of Safeway.
According to the news release, Cerberus said as a result of the merger, Safeway shareholders are expected to receive total value at $40 a share, i.e., cash of $32.50 per share, plus other contingent consideration with an estimated value of $3.65 per share; Blackhawk shares with a recent value of $3.95 per Safeway share to be distributed in a separate transaction to Safeway shareholders in mid-April
AB Acquisition plans to fund the merger in part with debt financing of approximately $7.6 billion, equity contributions from its current investors and their affiliates, partners and co-investors of approximately $1.25 billion, and cash on hand of Safeway.
Safeway’s existing indebtedness is contemplated to be repaid at closing, other than capital leases and the company’s 5.00% Senior Notes due 2019, 3.95% Notes due 2020, 4.75% Senior Notes due 2021, 7.45% Debentures due 2027 and 7.25% Debentures due 2031.
Goldman Sachs served as financial advisor to Safeway in connection with the company’s strategic review and the transactions. Greenhill & Co. has also served as financial advisor to Safeway. Latham & Watkins served as Safeway’s outside legal counsel. Citigroup, lead financial advisor, Bank of America Merrill Lynch and Credit Suisse served as financial advisors to Albertsons, Cerberus and the investor group. Schulte Roth & Zabel served as lead outside legal counsel to Albertsons, Cerberus and the investor group, and Dechert, Schulte Roth & Zabel and Baker Botts served as outside legal counsel on antitrust matters.
The merger will create a diversified network that includes over 2,400 stores, 27 distribution facilities and 20 manufacturing plants with over 250,000 dedicated and loyal employees. No store closures are expected as a result of this transaction.
Bob Miller, Albertsons current CEO, will become executive chairman. Robert Edwards, Safeway’s current president and chief executive officer, will become president and chief executive officer of the combined company.
Banners will include Safeway, Vons, Pavilions, Randalls, Tom Thumb, Carrs, Albertsons, ACME, Jewel-Osco, Lucky, Shaw’s, Star Market, Super Saver, United Supermarkets, Market Street and Amigos.
“Albertsons has successfully transformed underperforming retail grocery stores into strong performers by focusing on enhancing the local customer experience,” said Lenard Tessler, co-head of Global Private Equity and senior managing director at Cerberus. “Similarly, Safeway has consistently provided outstanding value and customer service throughout the communities it serves. Combining these strong management teams will strengthen the ability of Safeway and Albertsons to deliver on a shared commitment to offering customers higher quality products at lower prices, which will undoubtedly yield positive results for all stakeholders in the business.”
The merger is expected to close in the fourth quarter of 2014 following the satisfaction of customary closing conditions, including approval of the merger by the holders of a majority of the outstanding shares of Safeway common stock and regulatory approvals including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
To read the entire Cerberus Capital news release, click here.