Safeway in Talks Over Possible Sale of Company

By Associated Press
|  Wednesday, Feb 19, 2014  |  Updated 6:26 PM PDT
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Safeway says it's in talks to possibly put itself up for sale.

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Safeway says it's in talks to possibly put itself up for sale.

The Pleasanton, Calif.-based supermarket operator said Wednesday that discussions are ongoing but that it hasn't yet reached an agreement on a transaction. It added that it isn't certain the talks will end in a deal.

The company says it's postponing its annual investor conference that had been scheduled for early March as a result of the developments.

Safeway, which also operates Vons stores and has more than 1,300 U.S. locations, has been trying to adapt to a changing supermarket industry, with people increasingly doing their shopping at big-box stores like Target, drug stores and even dollar stores.

This past September, the company disclosed that it adopted a "poison pill" plan to prevent a hostile takeover. That move came as activist hedge fund Jana Partners had amassed a significant amount of Safeway's stock. Jana Partners had said it talked with the company about strategic alternatives, such as exiting regions that aren't profitable.

Safeway's disclosure came as the company reported a quarterly profit that beat Wall Street expectations, although sales fell short of expectations. Investors sent the stock up almost 4 percent to $35.90 in after-hours trading.

The company also said it would distribute the remaining shares it owns of Blackhawk Network Holdings to Safeway shareholders.

Safeway took the gift and prepaid card unit public in March and still owns about 72.2 percent of Blackhawk. If it closes on a deal, Safeway said the distribution may be taxable. It also said it was considering alternatives including a sale for its 49 percent stake in Casa Ley S.A. de C.V., a food and general merchandise retailer in Mexico.

For three months ended Dec. 28, Safeway earned $3.31 billion, or $13.46 per share. Excluding various one-time items, it earned 53 cents per share, above the 47 cents per share Wall Street expected. The results in the latest quarter were boosted by more than $3 billion from discontinued operations - the Canadian stores it sold during the quarter.

A year earlier, Safeway earned $244 million or $1.02 per share.

Revenue rose less than 1 percent to $11.31 billion, short of the $11.49 billion analysts expected.

Sales at established locations, a key indicator of health, rose 1.6 percent in the quarter.

Looking ahead to 2014, the company said it expects sales at established locations to rise 1.5 percent to 2.5 percent. Earnings per share are expected to be $1.15 to $1.35 per share, versus the $1.66 per share analysts expect.

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