UPDATE 2-Sobeys' parent Empire Co to buy Safeway Canada for C$5.8 bln
By Solarina Ho and Euan Rocha
TORONTO, June 12 (Reuters) - Empire Company Ltd, operator of the Sobeys grocery chain, said on Wednesday it is buying the Canadian arm of Safeway Inc for C$5.8 billion ($5.70 billion), a deal that will nearly double its reach in Western Canada.
Empire said the deal, one of the biggest in the Canadian retail sector this year, will give it control of 213 full-service grocery stores under the Safeway banner in Western Canada. It also includes nearly 200 in-store pharmacies, along with some liquor stores, fuel stations and distribution centers.
"We think this is a huge win for (Empire's) shareholders, and we expect a significant uptick in the stock tomorrow" said Barry Schwartz, a portfolio manager with Baskin Financial, which owns more than 100,000 shares in Empire.
"We think it is a game changing deal for Empire, as it was an Atlantic Coast-based grocery chain and it is making a huge push into Western Canada."
Safeway's Canadian arm generated sales of C$6.7 billion and had C$513 million of adjusted earnings before interest, taxes, depreciation and amortization in the 12 months ended March 23.
"We believe this transaction maximizes the value of our Canadian assets," Safeway Chief Executive Robert Edwards said on a conference call.
Edwards said there was no auction for the assets and the deal was unsolicited and came at a "substantial premium to the market multiples for U.S. retailers." Continued...