Safeway and Albertsons said Thursday that they have agreed to a merger in which AB Acquistion, the parent of Albertsons, will acquire Safeway for a total value to Safeway shareholders of $40 per share, or $9 billion.
“This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country. It also brings together two great organizations with talented management teams,” said Bob Miller, CEO, Albertsons. “Working together will enable us to create cost savings that translate into price reductions for our customers. Together, we will be able to respond to local needs more quickly and deliver outstanding products at the lowest possible price, more efficiently than ever before.”
Miller will become executive chairman and the combined company, and Robert Edwards, Safeway’s current president and CEO, will become president and CEO of the combined company.
The merger is expected to close in the fourth quarter of this year.
AB Acquisition, which is controlled by a Cerberus Capital Management-led investor group, plans to fund the merger in part with debt financing of approximately $7.6 billion, equity contributions from its current investors and their affiliates, partners and co-investors of approximately $1.25 billion, and cash on hand of Safeway.
Safeway shares were trading at just under $40 per share when the market closed on Thursday, after the Wall Street Journal had reported Wednesday that such a deal was imminent.
Read more: Safeway pursues initiatives during sale talks
Under terms of the transaction, Safeway shareholders will receive $32.50 per share in cash. Additionally, shareholders will have the right to receive net proceeds worth an estimated $3.65 per share from the sale of Safeway’s real-estate development subsidiary Property Development Centers, and the sale of Safeway’s 49% equity interest in Mexico-based retailer Casa Ley.
In addition, the merger does not alter Safeway’s previously announced plan to distribute the remaining 37.8 million shares of Blackhawk stock that it owns to its shareholders in mid-April. Safeway’s shares of Blackhawk, the gift-card company founded within Safeway and partially spun off last year, are to be distributed pro-rata to shareholders, with a current value of $3.95 per Safeway share.
The merger will create a company that includes more than 2,400 stores, 27 distribution facilities and 20 manufacturing plants with over 250,000 employees. The companies said no store closures are anticipated.
In 2013, Pleasanton, Calif.-based Safeway had about $36.1 billion in sales, and Albertsons, based in Boise, Idaho, had estimated sales of $23 billion.
Read more: Divestitures possible in Safeway-Albertsons deal
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