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Safeway Stock Up on Buyout Reports

PLEASANTON, Calif. — Safeway's stock rose nearly 8.2% Wednesday to $35.58 per share following approval by the Canadian Competition Bureau of the sale of its Canadian assets to Empire Co. and the speculation that followed that Safeway itself may become an acquisition candidate.


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The closing price was below Safeway's high for the year of $36.75 per share but represented a gain over the $32.90 it was trading at when the market closed Tuesday.

Reuters reported Cerberus Capital Management, New York, and other, unnamed private-equity investors might be interested in a buyout of Safeway or an acquisition of several of its assets now that the retailer has the $4 billion cash from the Canada sale on its balance sheet. Safeway said previously it plans to spend $2 billion to pay down debt and the other $2 billion to buy back stock, but industry observers suggested a buyout could be proposed and that Safeway might be interested, given its repeated assertions that it is seeking to create shareholder value.

Read more: Cerberus Said Eyeing Safeway

In a conference call with investors Wednesday morning, Karen Short, senior analyst at Deutsche Bank, New York, said, “Any bidder would want to get $4 billion in cash on the balance sheet. In addition, Safeway owns about 40% of its real estate, which would be worth up to $8 billion. And if Cerberus, a strategic player, was the buyer, there would also be synergies north of $500 million to $600 million, possibly up to $900 million.”

Synergies would include overhead savings, distribution efficiencies, advertising consolidation, private-label purchasing, labor and cost-of-goods, she said.

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