- America's second-largest supermarket chain, Safeway, has agreed to the purchase from an investor group led by private equity firm Cerberus Capital Management LP for over $9 billion.
- The deal calls for a merger between Safeway and Albertsons, the country's fifth-largest grocer. Together, they will form 2,400 stores.
- Safeway CEO Robert Edwards declared that coming together will improve their competitive position, as they will be able to achieve savings and offer more attractive prices to their customers.
The possibility of Safeway's sale emerged back in October, as we saw here in Safeway up for sale—and Cerberus could be a buyer. It seems that the deal is sealed for now, as any rival buyer wishing offer a better deal within 21 days would have to pay Cerberus a termination fee as high as $250 million.
The grocery business has a lot more contenders than in the past. Customers are no longer limited to traditional supermarkets for their groceries, and may choose to purchase them at discount chains like Wal-Mart and Target, or specialty store grocers like Whole Foods and Trader Joe's. That added competition puts more pressure on supermarkets to find ways to improve their strategic positions. In this case, Cerberus is hoping that the increased number of stores resulting from the merger will put the odds more in their favor.