Albertsons, Safeway deal advances

04/02/2014 12:23:00 PM
Pamela Riemenschneider

The $9.4 billion deal between Safeway and Albertsons owner Cerberus Capital Management is a step closer after no other bidders emerged for the Pleasanton, Calif.-based chain.

The deal would make the combined chain the second largest in the U.S., with 2,400 total stores.

Cincinnati-based Kroger Co. has 2,600, but it could be Kroger Co. that benefits from this deal, especially in markets where Safeway and Albertsons overlap the most, said Pewaukee, Wis.-based retail analyst David Livingston.

“Competitors like Kroger and WinCo could not be happier,” he said. “Kroger will probably be the biggest winner in this whole deal. No one shopped Safeway or Albertsons because of price, quality or service, but more that they were an acceptable alternative for convenience shopping. Kroger will pick up that business from disgruntled customers with all the overlap.”

Safeway and Albertsons, particularly in California where they had the most overlap, were underperformers in their market, he said, typically 20% or more below market average in sales per square foot.

“I expect Safeway sales to decline about 15%, which is normal when a below average operator takes over another below average operator,” he said.

Store closures are inevitable where the companies overlap, particularly in California, Arizona, Dallas and other markets in the West.

“Cerberus has had a long time to develop their plan and should breeze through FTC hearings,” he said. “Just like the last big Cerberus acquisition of Albertsons, we saw stores sold or closed by the bushel.”



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Creative Marketing Group    
Soquel, Ca  |  April, 03, 2014 at 05:39 PM

Wow, who thought The Packer would publish a "hit piece" with cheap shots and partial truths from an unknown analyst who doesn't address the potential synergies Safeway brings to the party such as Safeway's famed O Organic brand and the high quality Just For U loyalty card system for targeting customers. For the record, the "last big acquisition of Albertsons by Cerebrus" was when they bought the big Albertsons divisions from SuperValu and they kept virtually all of them. It was the original bulk purchase that saw weak stores liquidated. One would have hoped The Packer could have fact checked that and generally offered a more balanced and researched article.

Robert Bruce    
Wow  |  April, 07, 2014 at 11:33 PM

Double Wow!! Who is ever signing MR Livingstons Paycheck might want to reconsider. This cubicle worker who purports to be an Analyst is so off target with his non fact based statements that I quite frankly wonder if he ever picked up any information regarding the Safeway/Albertsons Merger. OH! Wait that Pay check, Maybe Kroger is signing it. His Analasist is so full of holes that it isn't worth refuting line by line. suffice to say he refers to Winco as a beacon of service and Qaulity. I guess that's like saying, Walmart is the King of service of Quality. and if that be the model, I pity this country!

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