- Private equity investors are considering a takeover of Safeway, the second-largest grocery chain in the U.S., sources close to the deal planning told Reuters.
- A purchase could involve parts or all of the chain, and could become the largest leveraged buyout (LBO) since the financial crisis hit in 2008.
- Safeway is valued at around $8 billion. The publicly held company trades on the New York Stock Exchange under the SWY ticker. Company management has hired Goldman Sachs to advise it on a potential sale.
- Among the potential buyers is Cerberus Capital Management, which completed a $3.3 billion purchase of Jewel-Osco and Albertsons in January, though any Safeway sale will likely be on friendly terms, as the company adopted a "poison pill" plan earlier this year to combat hostile takeover attempts.
If Safeway had asked us, rather than Goldman Sachs, for advice, we'd suggest caution. The idea of a Safeway takeover is being driven by the state of the debt market, not the state of the grocery business. Private equity firms operate in a world quite different from that of other businesses—and the primary differences involve a lust for debt, a break on taxes for management and a disregard for stakeholders.
An LBO of Safeway would be a great deal for shareholders and investment bankers. For the employees and customers? Probably not so much.