Will Kroger Cut Cerberus in the Checkout Line for Safeway?
Private-equity firm Cerberus Management LP is trying to secure its more than $9 billion deal to acquire the grocery store chain Safeway (NYSE:SFY), but there’s only one thing getting in its way: Kroger (NYSE:KR). According to the Wall Street Journal, the firm had hoped it was a done deal, offering to pay around $40 per share for Safeway, slightly above its current price, but then Kroger stepped in.
This week, reports indicate that the Cincinnati, Ohio-based company is now considering its own bid for the nation’s second-largest grocery store. It’s not clear whether Kroger is interested in buying all or part of Safeway, and it is still likely that Cerberus will emerge as the victor in a deal, but Kroger’s disruption has delayed Cerberus’s deal with Safeway, and the firm would like to get the show on the road.
Safeway has more than 1,300 stores and is the second-largest supermarket chain in the U.S. after Kroger by revenue, according to the Wall Street Journal. Its shares are currently trading at around $39.48. Safeway’s executives have been urged toward a possible sale of the company by advice from hedge funds like Jana Partners LLC to trim its store count and return capital to investors. Since then, Safeway has listened to investors by guaranteeing that it will exit the Chicago market and sell most of its seventy-two Dominick’s grocery stores, closing the rest.
Safeway’s stock has climbed more than 60 percent over the past year, and Cerberus sees it as high time to acquire the company. As mentioned before, Cerberus is offering to pay around $40 per share for Safeway, slightly above its current price, which values the deal at more than $9 billion. That would make for one of the largest supermarket mergers in recent years, the Journal says.