Safeway was sold to the parent company of top competitor Albertson's on Thursday in a merger of two supermarket giants reportedly valued at $9.2 billion. Safeway is the second-largest supermarket chain in the United States, trailing only Kroger Co., which owns supermarkets throughout the south, as well as the popular Southern California chain Ralph's and numerous other regional chain stores.
Cerberus Capital Management last year bought out Albertson's as well as Shaw's supermarkets, Star Market, Acme and Jewel Osco. Now the company has added the grocery store giant Safeway to its portfolio.
The price at which Safeway was sold has been reported at high as $9.4 billion. By merging Albertson's and Safeway, Cerberus now commands a supermarket empire of more than 2,400 stores that employ a quarter-million people.
That still puts the new supermarket behemoth well behind the nation's largest private employer, Wal-Mart, with its 2.2 million employees. The combined company still ranks behind Kroger with its 2,600 stores as well.
In fact, it is competition from "big box" stores such as Wal-Mart, as well as discount warehouse outlets like Costco — and upscale supermarkets such as Whole Foods and Trader Joe's — that has put the squeeze on traditional supermarket chains and played a role Safeway ultimately being sold.
"There is a clear and compelling rationale for this merger,'' said Safeway CEO Robert Edwards, who will be CEO of the merged company after Safeway is sold. "This merger will improve our competitive position."
Edwards said that consumers can look forward to lower prices, thanks to the increased efficiency expected now that Safeway is sold to Albertson's. But he also said that the merged company does not expect to close any of its current store locations.
Alberston's CEO Bob Miller becomes executive chairman of the new company to be formed as soon as Safeway is really sold.
The way these giant deals work, the truth is Safeway is not sold yet. The company has 21 days to listen to other offers. But if Safeway is sold to another company, that buyer would have to fork over $250 million to Cerberus for its pains.
Kroger has expressed interesting buying some Safeway stores, so though the company would nor comment Thursday, the possibility remains of Safeway being sold, at least in part, to the only supermarket company bigger than itself.