Giant American supermarket chain Safeway hinted about a sale of the company last month. Today, Safeway's Board of Director unanimously approved the merger agreement with Cerberus Capital Management, a private equity firm that owns Albertsons and other chains including Jewel-Osco.
According to Safeway, the deal is valued at $9.2 million, making it the undisputed leading competitor to Kroger. The merger will create more than 2,400 stores with more than 200,000 employees, as well as 27 distribution facilities and 20 manufacturing plants.
Investors at Safeway are entitled to receive $40 per share, consisting of $32.50 in cash. They will also get additional stocks in its gift-card unit Blackhawk Network Holdings Inc. No stores will be closed, the company said.
Meanwhile, Safeway Chief Executive Officer Robert Edwards will be the new president and CEO of the combined company, while Albertsons CEO Bob Miller will be the executive chairman.
Cerberus leads $9bn bid for Safeway http://t.co/KQWWccYFBc— Financial Times (@FinancialTimes) March 7, 2014
Wolfe Research analyst Scott Mushkin estimated the newly merged company will make around $60 billion in revenue. "It will create a dominant West Coast operation as well as meaningfully enhance the eastern portion of the company,” Mushkin told Bloomberg.
Furthermore, Safeway noted that the merger will also enhance the shopping experience of its customers by lowering down costs. But that won't happen until the merger is full-approved. The Safeway-Albertsons merger is expected to be completed in the fourth quarter this year.
“This merger will improve our competitive position,” says Safeway Chief Executive Officer Robert Edwards. “Our customers will benefit from significant cost saving synergies and a stronger management team.”