Following clearance from the Federal Trade Commission (FTC), AB Acquisition LLC and its parent company, private equity firm Cerberus Capital Management, officially completed their $9.4 billion acquisition of Safeway, Inc. on January 30. The deal will create a network of 2,230 supermarkets, 27 distribution facilities and 19 manufacturing plants. More than 250,000 will be employed across 34 states and the District of Columbia.
“We plan to be the favorite local supermarket in every community we serve,” said former Safeway president and CEO Robert Edwards, who now will hold those titles at the newly combined organization. “We will do this by knowing, listening to, and delighting our customers; providing the right products at a compelling value; and delivering a superior shopping experience. We will also continue to be active members of our local communities.”
Albertsons’ CEO Bob Miller, who will become executive chairman of the expanded retailer, added that the resulting new organization will be “transformative” for both companies.
“This merger creates a unified, strong organization that is dedicated to bringing a better shopping experience to more customers across the country,” Miller declared. “Our combined geographic footprint, vast range of brands and products, and service-oriented staff will enable us to meet evolving shopping preferences.”
With the transaction finalized, Safeway’s shares have now been delisted from the New York Stock Exchange.
As a result of the merger, shareholders of the now delisted Safeway stock will receive $34.92 per share in cash, consisting of $32.50 in initial cash consideration, $2.412 in consideration relating to the previously announced sale of the assets of Safeway’s real-estate development subsidiary Property Development Centers (which was sold in December to Terramar Development) and $0.008 in consideration relating to a dividend of approximately $2 million (after deduction for taxes at an assumed rate) that Safeway received in December 2014 on its 49 percent interest in Mexico-based food and general merchandise retailer Casa Ley.
Shareholders also will receive contingent value rights entitling them to pro rata proceeds relating to deferred consideration from the sale of the Property Development Centers and any proceeds from the sale of Safeway’s 49 percent interest in Casa Ley.
Earlier, in April 2014, Safeway stockholders received a distribution of stock in Safeway’s former Blackhawk Network Holdings, Inc. subsidiary valued at approximately $4.02 per Safeway share at the time of the distribution.
The FTC’s clearance also gave approval of Albertsons’ and Safeway’s agreement to a proposed consent order, which included a commitment to divest 168 stores.
Those stores were sold to four FTC-approved buyers – Haggen, Supervalu, Associated Food Stores and Associated Wholesale Grocers. Albertsons and Safeway also agreed to settlements with the attorneys general of California, Nevada and Washington.
Besides its own branded stores, Safeway operated Vons, Pavilions, Randalls, Tom Thumb and Carrs stores, and had 2013 sales of $35.1 billion.
The new company is comprised of three regions and 14 retail divisions, supported by corporate offices in Boise, Pleasanton and Phoenix. 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.
With the merger completed, new senior leadership team and division leaders for the combined company also take effect.
“We’re drawing on the strong talent within both companies to build an innovative, customer-focused and growth-driven company,” Edwards said. “We are confident in this team’s ability to build a great company that’s positioned to win over the long term by earning the loyalty of grocery shoppers in every market we serve and delivering superior operational and financial results,” Edwards said.
The new leadership team includes: Bob Gordon, executive VP and general counsel; Shane Sampson, executive VP, marketing and merchandising; Andy Scoggin, executive VP, human resources, labor relations, public affairs and government affairs; Jerry Tidwell, executive VP, supply chain and manufacturing.
On the operations side, three senior leaders have been named: Wayne Denningham, executive VP and COO, south region; Justin Dye, executive VP and COO, east region; and, Kelly Griffith, executive VP and COO, north region. Additionally, Lee Wilson will serve as executive VP and chief administrative officer of the new company.
Reporting to him will be Bob Dimond, executive VPÂ and CFO; Justin Ewing, executive VP, corporate development and real estate, and Barry Libenson, interim executive VP and chief information officer. Libenson is expected to be with the new company through March, at which time a successor will be named.
In the east region, which will be under the umbrella of subsidiary, New Albertsons Inc., the new division presidents are: Steve Burnham, eastern division; Jim Perkins, Acme division; Jim Rice, Shaw’s division; and Mike Withers, Jewel-Osco division. All will report to Dye.
Other divisions operating under the Albertsons LLC subsidiary are: Dennis Bassler, Portland division, north region; Paul McTavish, Denver division, north region; Susan Morris, Intermountain division, north region; Tom Schwilke, Northern California division, north region; and Dan Valenzuela, Seattle division, north region. Those division presidents will report to Griffith.
The south region’s division presidents are (also supervised by Albertsons LLC): Shane Dorcheus, Southwest division; Scott Hayes, southern division; Sidney Hopper, Houston division; Lori Raya, southern California division; and Robert Taylor, United division. They will all report to Denningham.
No name changes are planned for any of the stores affected by the merger, including Safeway stores.
“We know the best way to grow our business is to have the highest quality fresh departments, lower prices, clean, well-stocked stores and the best customer service in the market,” executive chairman Miller said.
“Our teams will focus on delivering what customers want locally, and we will give our store teams more flexibility to make decisions that are right for their neighborhoods,” he added. “The division teams will have the responsibility to have the right assortment for their markets.”
The newly combined entity is also expected to operate in a less decentralized manner, more resembling Acme and Shaw’s, not the process-driven bureaucracy that many in the industry claimed has hindered Safeway’s ability to move quickly and make local decisions.
At Safeway’s eastern division that change should be seen shortly in more aggressive pricing and merchandising as well as a revamped advertising program.
To supplement more local decision making, the Lanham, MD division will add category managers and bolster the decentralized process by adding other personnel geared to make decisions more germane to the Baltimore-Washington market.
Although the final organization chart has not yet been completed, we’re told that Matt Boyd, former category manager for Albertsons’ Portland division, has come to the eastern division as sales manager; Ricardo DiMarzio (most recently of Shoppers Food & Pharmacy) will serve as category manager of produce; Tim Ley will be joining as a category manager; and former Safeway category manager Ron Stone will be returning to Safeway in procurement. On the operations side, Brad Spooner, former VP-merchandising execution, will become a district manager. Relocating from other divisions to serve as district managers are Donovan Ford, (formerly with Jewel-Osco) and Dale Norton, who will move from the Safeway’s Denver division. Along with division president Steve Burnham, the eastern division senior management team will be Tom Lofland, VP-marketing and merchandising (who recently came over from FoodCity in Virginia) and Dean Willhite, who remains as VP-operations.
