Safeway Said to Near $9B Supermarket Sale

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March 7 (Bloomberg) -- Safeway is near an agreement to be acquired by Cerberus Capital Management LP for about $9 billion, said a person with knowledge of the matter. Cristina Alesci reports on Bloomberg Television's “In The Loop.” (Source: Bloomberg)

Business case -- this is a deal about getting bigger and stronger in a fiercer and fiercer competition and not just from the krogers of the world, which, by the way, is still 200 stores bigger than this combined company, but again, walmart and amazon.

Amazon is getting into the food business, walmart has been there and really eating the traditional grocery stores' lunch for a very long time was up at the high-end, you have stores like whole foods, so the middle, the plain-vanilla supermarkets, have been getting squeezed.

So much so that this year, sales in supermarkets are projected to drop about 1.7%. so you are not going to get the growth on the top line.

You have to take costs out pretty drastically, and that is at the heart of what the deal is about.

Exactly.

And that is where these private equity players come in.

They are able to do that very well.

Right.

The big this -- the business case is simple but the way you can together is complex because back in 2006, cerberus decided to get into this business by buying some i wasn't stores come about 655 stores.

He added to that last year by buying some brands from supervalu, and this is the latest link in the puzzle.

It is what could be called in traditional private equity language a rollup of a business.

This is an indication that private equity cannot just go out and do the traditional leveraged buyouts, though this one kind of looks like one.

They have to go out and do more creative things and this is one of those creative things.

One question that you brought up in your intro is whether or not kroger, who you have a good relationship on, you had the cfo on, and you asked him about this yesterday, whether or not they would come in and make a competing offer for this, and there is a 21 so-called go shot period where they can come in and make a higher bid here.

Wife i am glad you brought that up because we did speak with michael schwab and -- michael s chlotman, and i asked him what do you like about safeway as a competitor, what do you not like, and this is what he said.

There is a lot we try to learn from them.

They had a stronger organic private-label program than we did.

We think we are closing that cap with our simple truth line.

They have priced some things in home delivery and the like that we actually like the solution that harris peter has a little better than worrying about the home delivery.

So there is always something you learn when you go inside of a competitor.

Kroeber, by the way, is more than double the size of safeway, so -- however, there are questions, do they really want to swallow up the whole company?

Maybe they just want pieces.

That is where the play might be because of this point, as you mentioned, kroger acquired harris peter.

If they made a play for safeway, they could come under an antitrust scrutiny for the government.

There is a play for them and gobbling up some of the asset that my fallout of this deal, but the combined company now, albertsons and safeway, has about 2400 stores, and kroger has won a 600. they are kind of -- has 2600.

This text has been automatically generated. It may not be 100% accurate.

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