Sobeys, Canada’s second-largest supermarket operator, has agreed to purchase Canada Safeway’s 223 stores, 12 manufacturing facilities and four distribution centers.
The business generated $6.56 billion in revenues for the 12 months ended March 23, 2013, and had an operating profit of $419 million.
Canada Safeway had long been considered an attractive acquisition target because of its locations, brand equity and strong loyalty program. Other potential suitors included Loblaw, Canada’s largest supermarket company, and third-ranked Metro.
Robert Edwards, Safeway president and CEO, said proceeds from the unsolicited deal will be used to grow Safeway’s ongoing businesses. By shedding its Canadian operations, Safeway receives much-needed cash that also will be used to pay down $2 billion of debt. But Safeway also loses a strong revenue generator: The company planned to launch its Just for U digital marketing program — which provides shoppers with personalized pricing and digital coupons — in Canada during the third quarter. Safeway attributed its first quarter U.S. same-store sales increase to Just for U and noted that the absence of the program was a key reason that Canadian sales growth was trailing that of its U.S. stores.
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Sobeys could still benefit from the program; Edwards says Safeway plans to talk to the retailer about potentially adopting the Just for U technology. As part of the sales agreement, Sobeys also can use the Canada Safeway name and related trademarks.
Date: Aug 5, 2013