TORONTO--Empire Co. (EMP.A.T), parent of Canada's second-largest
grocery chain, said Wednesday that it has agreed to acquire Safeway
Inc.'s (SWY) Canadian operations for 5.8 billion Canadian dollars
($5.68 billion) in cash, a move that will significantly boost its
presence in western Canada.
Nova Scotia-based Empire Co., parent of Sobeys Inc., said the
purchase of Canada Safeway Ltd. will add 213 full-service grocery
stores in western Canada, as well as four distribution centers and
12 manufacturing plants. Most of the stores come with in-store
pharmacies and 62 have fuel stations, it noted.
The purchase adds C$1.8 billion in owned real estate and will
make Sobeys the largest grocer in the oil-rich province of Alberta.
Empire Co. said that, in the 52 weeks ended March 23, Canada
Safeway had sales of about C$6.7 billion and C$513 million of
adjusted EBITDA.
It expects the purchase to boost earnings immediately and has
identified cost synergies of about C$200 million a year within
three years, from such moves as integrating the companies'
distribution networks, and cutting procurement, administration and
marketing costs.
Separately, Safeway said it will use the proceeds to pay down
about $2 billion of debt and much of the remainder to buy back
stock.
Empire Co. said it plans to partially finance the deal through
an equity offering totaling C$1.5 billion.
Write to Carolyn King at carolyn.m.king@wsj.com
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