Safeway Gains Shareholder Approval For Cerberus Deal

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At Safeway’s annual shareholders’ meeting held July 25 at the company’s headquarters in Pleasanton, CA, shareholders voted overwhelmingly to approve the company’s acquisition by AB Acquisition LLC, a unit of Cerberus Capital management, the large New York city-based private equity firm. The annual meeting was postponed from May to allow for the acquisition vote.

Also approved at the stockholders’ meeting was a non-binding advisory proposal to authorize a merger-related compensation plan for Safeway’s top-level executive officers. Shareholders also voted down two other measures: a proposal to label products containing genetically modified ingredients (GMOs), and one against extending producer responsibility. Safeway’s board recommended against both those proposals.
According to Safeway, 70 percent of the outstanding shares and 96 percent of the shares voted were in favor of the merger.

The deal, originally announced in March, is valued at approximately $9.2 billion ($40.10 per share) and includes 1,335 stores, 13 distribution centers and 20 manufacturing plants. Pending any divestitures that might be required by the Federal Trade Commission, the merger with Safeway would give Albertsons almost 2,400 stores with total sales approaching $60 billion.

The Safeway deal is one of the largest private equity acquisitions in industry history and the largest since Kroger acquired Fred Meyer, the large West Coast retailer, for approximately $13 billion in 1998. With the completion of the merger, New Albertsons will become the second largest “pure play” supermarket chain in the U.S. behind Kroger. (That chain also made a big move in February of this year when it got approval for its $2.48 billion acquisition of Matthews, NC-based Harris Teeter.)

In June, Safeway’s Eastern division was assigned by Cerberus/AB Acquisition LLC to be switched from its Albertsons LLC unit to its New Albertsons Inc. (NAI) subsidiary. Albertsons LLC oversees the nearly 200 Albertsons stores that Cerberus acquired from Supervalu in 2006 as well as the Albertsons stores on the West Coast that were part of another Supervalu purchase in March 2013. United Supermarkets, which was also acquired by Cerberus/AB Acquisition in September 2013, is also under the Albertsons LLC umbrella.

The pending Safeway stores were also placed in the Albertsons LLC group before the recent switch of Safeway’s Eastern division to New Albertsons Inc. NAI is comprised of Jewel-Osco, Acme and Shaw’s (approximately 450 units). Now that Safeway’s Eastern division has been added to that unit, it makes for a more logical geographic alignment and also will help with NAI’s debt rating. The intra-company transaction was valued at $659 million for the 124 stores primarily located in the Baltimore-Washington market.