Safeway To Sell Its Canadian Operations To Sobeys For C$5.8B
Safeway announced during a conference call this afternoon that it has reached a definitive agreement to sell its Canadian operations to Sobeys for $5.69 billion in cash, which equates to $5.8 billion in Canadian dollars. The transaction is expected to close in the fourth quarter.
Sobeys is a Canadian food retailer and wholly-owned subsidiary of Empire Co. Limited. The proceeds from this transaction are expected to be used to pay down $2.0 billion of debt, with the majority of the remainder to be used to buy back stock. In addition, some of the proceeds may be used to invest in growth opportunities, Pleasanton, Calif.-based Safeway says.
In the trailing 12 months ended March 23, Canada Safeway’s revenues were C$6.7 billion. In addition, Canada Safeway’s operating profit was C$428 million and EBITDA was C$544 million, both adjusted for intercompany related transactions. Canada Safeway will be accounted for as discontinued operations beginning in the second quarter of 2013. Safeway Inc. remains responsible for Canada Safeway’s C$300 million in public debt due March 2014, which is not included in the transaction, and Safeway also will retain cash and other receivables in a similar amount in Canada.
“We are pleased to enter into this agreement with Sobeys in order to realize the higher multiples attributed to Canadian supermarket companies,” said Robert Edwards, president and CEO of Safeway Inc. “The substantial cash proceeds from this transaction will allow us to create value for Safeway stakeholders and contribute to the growth of the ongoing business.”
The transaction has been approved by the boards of directors of both companies. The transaction is anticipated to close in the fourth quarter of 2013 and is subject to customary closing conditions, including approval under the Competition Act (Canada).
Safeway Inc. is a Fortune 100 company and one of the largest food and drug retailers in North America based on sales. The company currently operates 1,415 stores and 20 manufacturing facilities in the U.S. with 2012 revenues of $37.5 billion.