UPDATE 4-U.S. grocer Safeway says exploring sale of company

Wed Feb 19, 2014 6:39pm EST
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By Dhanya Skariachan and Greg Roumeliotis

NEW YORK Feb 19 (Reuters) - Safeway Inc, the second-largest U.S. mainstream grocery store operator, said on Wednesday it is in talks about a possible sale of the company.

A handful of buyout firms, including Cerberus Capital Management LP, have been exploring a deal for all or part of Safeway, Reuters reported in October.

Cerberus is currently in talks with Safeway about a possible transaction, a person familiar with the matter told Reuters on Wednesday.

The source asked not to be identified because the talks are private. A Safeway spokesperson could not immediately be reached for comment on the talks with Cerberus. Cerberus declined to comment.

Wednesday's news comes as the operator of chains such as Safeway, Vons and Dominick's tries to fend off tough competition in the grocery aisle from traditional players such as Kroger Co , warehouse club Costco Wholesale, discounter Wal-Mart Stores Inc and dollar stores.

The company had also been pressured by activist investor Jana Partners to review strategic alternatives.

Safeway shares trade at about 19.9 times forward earnings, while the larger grocery sector trades at a multiple of 15.2. The stock was up 4.3 percent at $36.10 in after-hours trading.   Continued...