Empire Co.'s Sobeys Unit to Acquire Canada Safeway for C$5.8 Billion

Empire Co.'s Sobeys Unit to Acquire Canada Safeway for C$5.8 Billion

Empire, parent of Canada's second-largest grocery chain, has agreed to acquire Safeway's 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.

 Source: WSJ