Canadian food retailer Sobeys Inc. has entered into an agreement to buy the Canadian operations of grocery giant Safeway Inc. (NYSE: SWY), Safeway announced this morning.
The $5.8 billion transaction – which works out to about $4 billion after taxes and expenses – has been approved by the boards of directors of both companies, with an anticipated transaction closure sometime in the fourth quarter of 2013.
“We are pleased to enter into this agreement with Sobeys in order to realize the higher multiples attributed to Canadian supermarket companies,” said Safeway Inc. president and CEO Robert Edwards.
“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 company is not sure whether it will be re-branding the Safeway stores.
“It's too early to tell, obviously, at this stage,” said Sobeys president and chief executive Marc Poulin.
“We just completed the acquisition. We will do proper marketing and research to determine what will be the course on the bannering side.”
Safeway Inc., which has 223 stores and 12 manufacturing facilities in Canada, plans to use the proceeds of the sale to pay down approximately $2 billion in debt and to use the remainder to buy back stock and invest in growth opportunities.
