Safeway sells Canadian operations to Sobey’s owner for $5.7 billion

Publish Date: June 13, 2013

Topics: canada, empire, grocery, retailer, safeway, sale-leaseback, sobey's, supermarket, transaction

U.S.-based supermarket chain Safeway signed a deal to sell its Canadian operations to Empire Co., owner of the Stellarton, Nova Scotia–based Sobey’s supermarket conglomerate, for $5.7 billion. The agreement includes 213 Safeway-branded supermarkets totaling 9 million square feet, 10 liquor stores, 12 manufacturing facilities and four distribution centers.

The deal expands Sobey’s reach into western Canada, with 60 percent of the stores to be acquired located in Edmonton, Calgary, Vancouver and Winnipeg. Most of its 1,300 stores, which are operated under a variety of banners including Foodland, Freshco, IGA and Thrifty Foods and Sobey’s, are located in the eastern portion of the country. In 2012 the Canadian Safeway stores brought in revenues of $6.7 billion.

Empire said it plans to finance the deal in part through a sale-leaseback deal for many of the acquired properties that will raise $980 million. Empire said the owned real estate to be acquired is worth $1.77 billion. Sobey’s chief executive Marc Poulin said he expects to be able to capture roughly $196 million in annual savings within three years following the close of the deal. The savings will come from integrating distribution networks and reducing the cost of procurement, administration and marketing, among other things.

Safeway, which operates 1,415 U.S. stores with 2012 revenue of $37.5 billion, said it would use about $2 billion of the proceeds to pay down debt and buy back stock. “This transaction maximizes the value of our Canadian assets,” Safeway chief executive Robert Edwards said on a conference call. He pointed out the deal was unsolicited and came at a “substantial premium to the market multiples for U.S. retailers.”


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