Kroger could be a player in Safeway sale

According to published reports, Kroger, the largest supermarket chain in the U.S., recently approached Safeway about buying part of its operations. The reports also said that Kroger contacted Cerberus Capital Management, the private equity firm that is considered the favorite to purchase Safeway, about buying some stores that Cerberus may not want.

Cerberus led the investor group that purchased Supervalu last year. Safeway recently closed its 72 Dominick's stores in the Chicago area, sold its Canadian business, and in the last couple years sold or closed all but one of its Genuardi's stores.

Experts speculated that an arrangement between Kroger and Cerberus could help address antitrust concerns that could arise in select markets if one of the companies purchases Safeway.

Safeway confirms that it may sell

In October I wrote about a published report that claimed Cerberus was looking into a takeover of all or part of Safeway. Yesterday Safeway confirmed that discussions were taking place involving a possible sale of the company.

In a statement, the company said it "has not reached an agreement on a transaction, and there can be no assurance that these discussions will lead to an agreement..."

Last year Safeway sold its Canada and Dominick's divisions, and before that sold or closed all of its Genuardi's stores except one (Audubon, PA).

"Banner Churn" of 2013 may continue into 2014

Supermarket News published an informative year-end story about the many changes that took place this year in the food retail industry. They called it a year of "banner churn."

The article starts by pointing out that the "big three" made major moves. Kroger agreed to buy Harris Teeter, Safeway sold its Canada division and announced that its closing its Dominick's chain in Chicago (only a year after closing all but one of the company's Genuardi's stores), and Supervalu sold 877 stores - including the Albertsons and Acme chains - to an investment group led by Cerberus that includes Kimco and Philadelphia's Lubert Adler.

Regarding the Supervalu deal, Albertsons Chief Executive Robert Miller told Supermarket News that "we're in this for the long haul," and that "we have no plans to sell any of the brands."

Whether Miller is being truthful, or simply truthful for now, is yet to be seen. There are many that don't believe the company will hold on to Acme - or at least the banner's many underperforming stores - for very long.

As for the industry's future, Irene Marks and David Mell of Wells Fargo believe "consolidation and capital markets activity will remain robust well into 2014 as the grocery industry continues to evolve to suit today's eclectic, diverse and conscientious consumer."

To read the Supermarket News story, click here.

Cerberus exploring a deal to takeover Safeway

According to a report from The Chicago Tribune, Cerberus Capital Management is exploring a deal for all or part of Safeway, the second-largest supermarket operator in the U.S. In addition, Supermarket News said this morning that according to a Reuters report, Safeway has engaged Goldman Sachs to explore a potential private equity takeover.

Safeway, which exited the Philadelphia market by selling or closing its Genuardi's stores (with the exception of one remaining store in Audubon, PA) and recently announced that it plans to exit the Chicago market by selling its Dominick's chain, just received clearance from Canada to sell its 212 stores there to Empire Co. for $5.8 billion in cash.

Earlier this year, Cerberus led an investor group that included Kimco in a $3.3 billion acquisition of a group of supermarket chains from Supervalu that included Acme, Albertsons and Jewel-Osco.

Other grocery deals completed this year included Kroger's $2.5 billion acquisition of Harris Teeter, Bi-Lo Holdings $265 million purchase of three Delhaize chains, and Spartan's acquisition of Nash Finch.

Safeway has experience with private equity, as KKR took the supermarket chain private in 1986. KKR sold its stake 13 years later and reportedly made a $7 billion profit.

According to Safeway's website, there are currently over 1,600 Safeway stores in the United States and Canada. Banners include Safeway, Vons, Dominick's, Randalls, Tom Thumb and Carrs.

Safeway to dispose of Dominick's chain in Chicago

Safeway announced last week that it plans to dispose of its 72 Dominick's supermarkets in the Chicago area. Safeway is also the parent company for Genuardi's, which recently exited the Philadelphia market (with the exception of one yet-to-close store in Audubon, PA).

Dominick's had a loss of $31.5 million for fiscal 2012, and losses are projected to increase this year. Safeway said that selling the chain will likely result in a cash-tax benefit of between $400 - $450 million that it will use to offset expenses from the recent sale of its Canadian assets.

In a separate report, Safeway said there has been interest from several parties for Dominick's, and the company seeks to exit the Chicago market by early 2014.

According to Safeway President and CEO Robert Edwards, "Everything we do is designed to maximize shareholder value, and the sale of Canada, the partial IPO of Blackhawk, and now the decision to leave Chicago demonstrates that commitment."

Safeway announces quarterly earnings, beats the street

Safeway's (Genuardi's) third quarter earnings of .38 cents per share beat analysts' estimates by three cents. The company, which released its earnings last week, credited positive sales momentum and cost control measures when discussing its results.

Safeway, which has stores under the Safeway, Vons and Dominick's banners, also owns Genuardi's here in the Greater Philadelphia market. Store closings and decreasing sales has led to speculation lately that Giant will soon buy a number of Genuardi's locations. Two Genuardi's stores in Bucks County were sold to Giant late last year.

For the quarter, Safeway's revenue grew 7% and same-store sales grew 1.5%.