Sobeys grocery chain to buy Safeway's Canadian arm for $5.70 bn
13 Jun 2013
Empire Company Ltd, operator of Canada's Sobeys grocery chain, yesterday said that it would acquire the Canadian arm of Safeway Inc, for C$5.8 billion ($5.70 billion), in order to expand in Western Canada.
The deal will further strengthen Sobeys No 2 position in Canada at a time when its US rivals Wal-Mart and Target are setting up stores in a big way in the country.
The deal will give Empire 213 stores in Western Canada, 199 in-store pharmacies, 62 co-located fuel stations, 10 liquor stores, 4 distribution centres and 12 manufacturing facilities.
The deal includes 9 million square feet of real estate, with an average store size of 42,000 sqft, worth a total $1.8 billion.
The purchase is expected to bring in synergies of $200 million in three years following the close of the transaction.
The acquisition, the largest in the Canadian retail sector this year, will make Sobeys the leading grocer in Western Canada and in Alberta.
Safeway's Canadian arm generated sales of C$6.7 billion in the 12 months ended 23 March and annual revenue of the merged company will be around $24-billion.
Empire plans to fund the all-cash transaction through equity, debt, and a leasing back some real estate assets that is being acquired.
It said it that it has identified around C$1 billon in non-core assets sales that could that potentially be used to help pay back debt.
The deal, which is subject to approval by the Canadian regulator, is expected to close later this year.
Nova Scotia-based Empire's key businesses include food retailing and corporate investment activities.
Its food retailing division is carried on through wholly-owned Sobeys, which owns or franchises more than 1,500 stores located in every province of Canada under retail banners that include Sobeys, IGA extra, Thrifty Foods, IGA, Foodland and FreshCo.
The Canadian retail sector is heating up with Target Corp, the second-largest US retail chain after Wal-Mart Stores, had in 2011 said that it plans to enter Canada by paying $1.84 billion for taking over leases of 220 stores in Canada from Zeller Inc, a subsidiary of Hudson's Bay Co.
