Cerberus Takes Safeway in $9B Merger

PLEASANTON, CA—Cerberus Capital Management's lengthy courtship of supermarket chain Safeway Inc. has reached fruition, as the Cerberus-controlled AB Acquisition LLC will acquire all outstanding shares of Safeway. The deal is valued at more than $9 billion.

AB Acquisition is the owner of Albertson's LLC and New Albertsons Inc. and is controlled by a Cerberus-led investor group. Other partners in the group include Kimco Realty Corp., Klaff Realty LP, Lubert-Adler Partners LP and Schottenstein Stores Corp.

Expected to close in the fourth quarter, the combined company will create the second largest platform in the supermarket space behind Cincinnati-based Kroger Co., encompassing more than 2,400 stores across the US, 27 distribution facilities and 20 manufacturing plants. No store closures are expected as a result of this transaction.

Robert Edwards, current president and CEO of Pleasanton, CA-based Safeway, will assume the same roles within the combined company. Bob Miller, CEO of Bosie, ID-based Albertsons, will become executive chairman.

“Albertsons has successfully transformed underperforming retail grocery stores into strong performers by focusing on enhancing the local customer experience,” says 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 the management teams, he says, will strengthen the ability “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.”

Banners under the combined company 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. The Los Angeles Times quoted Miller as saying the two companies would "remain competitors" until the deal closes. GlobeSt.com will provide further reporting on the merger as more information becomes available.