With the Albertson (A/B Acquisition LLC/Cerberus Capital Management) acquisition of Safeway stores imminent, the Boise, ID chain announced that it has entered into agreements to sell 168 stores to four separate buyers, pending Federal Trade Commission approval, as part of the process to acquire Safeway stores. Safeway shareholders approved the proposed agreement on July 25, 2014.
None of the stores to be divested are east of the Mississippi and, with this announcement, the Albertsons purchase is expected to close later this month.
The four buyers are: Associated Food Stores (AFS), which will purchase eight stores in Montana and Wyoming; Associated Wholesale Grocers (AWG)/Minyards, which will acquire 12 stores in Texas; Supervalu, which will buy two stores in Washington state; and Haggen (controlled by private equity firm Comvest), which has agreed to buy146 stores in Arizona, Nevada, California, Oregon and Washington.
Former Save-A-Lot (Supervalu) president Bill Shaner has been named president and CEO of Haggen’s newly formed Pacific Southwest division, which will increase the size of the Bellingham, WA regional chain by more than eight-fold (Haggen currently operates 18 stores in Washington and Oregon). The deal will find the upscale retailer entering the competitive Southern California market for the first time.
Of the divested stores that were announced, 111 of those units carried the Albertsons banner and 57 supermarkets operated as Safeway units or its subsidiaries Vons and Tom Thumb.
Under the terms of the purchase agreements, the buyers will acquire the stores, equipment and inventory, and they intend to hire most, if not all, of the store employees upon the closing of the purchase of the stores.
“We’re pleased to have found strong buyers for these stores and to have completed this important step toward combining Albertsons and Safeway,” said Safeway president and CEO Robert Edwards, who will also hold those titles once the companies are combined. “We look forward now to the transaction’s close, so we can begin working together to enhance the loyalty of grocery shoppers by delivering high quality products, great service and lower prices to become the favorite local supermarket in every neighborhood we serve.”
In a related development before the Albertsons acquisition is finalized, Safeway announced it has sold its real estate development assets to Terramar Retail Centers, Carlsbad, CA.
The real estate assets were owned by Safeway’s wholly-owned subsidiary Property Development Centers (PDC). The sales price was approximately $830 million, pending certain final adjustments.
Terramar is a neighborhood shopping center owner and developer which currently controls 24 properties mainly in California and other West Coast markets. Among the properties being acquired by Terramar are 11 completed retail shopping centers, nine retail shopping centers under construction – including a 24-acre retail project and housing complex in Walnut Creek, CA that will be anchored by a 55,000-square-foot Safeway and five projects in “due diligence” and entitlement phases.
The proceeds from the deal are valued at $2.45 per share, of which $2.38 is estimated to be paid at the closing of the pending acquisition. Safeway stockholders will also receive a contingent value right at the closing of the merger relating to any additional net cash proceeds from the sale of PDC, including any amounts released from escrow, any additional payments from Terramar and any holdback amounts not spent for potential contingent liabilities. Safeway estimated these amounts total approximately $29 million, or approximately $18 million net of tax, which, if paid, would represent approximately $0.07 per share.