Published On: Fri, Mar 7th, 2014

Stephen Feinberg Merges The Albertson Supermarket Chain With Safeway In A Deal Worth $9 Billion

Feinberg, CEO of Cerberus Capital Management, owners of Albertsons, has created one of the largest supermarket chains in the United States with over 2, 400 outlets.

Stephen Feinberg / Getty

Stephen Feinberg, co-founder and CEO of Cerberus Capital Management, has succeeded in putting together one of the largest acquisition deals in the history of the retail industry in America with the merger of the Safeway chain with the  Albertsons retailing group which they control.

Only last year Feinberg’s Cerberus Capital Management led an investor group that paid around $3.3 billion to acquire the Albertsons retailing group from Supervalu Inc.

Now Cerberus stands to increase the footprint considerably, having agreed to pay just over $40 per  share to acquire Safeway, who have more than 1300 outlets through the USA, which when added to  the 1100 stores in the Albertsons chain spread out through their Albertsons, Acme, Jewel-Osco and Shaw’s brands, will  make them the second largest food retailing chain in the United States.

The Albertsons-Safeway tie-up would create a company with more than 2, 400 stores, 27 distribution facilities and 20 manufacturing plants with 25, 000 employees, with no closures or lay offs  anticipated in the immediate future.

Under the terms of the merger agreement , shareholders in Safeway were due to receive $32.50 a share in cash, plus other considerations and stock in Blackhawk Network Holdings Inc.,  according to a joint statement issued by both companies.

_Albertsons_

On the news of the intended acquisition shares in Safeway dropped slightly in value to $38.47 before the market closed on Thursday. However, in after hours trading Safeway’s  shares dropped considerably, and are currently valued $38.14.

Shares in Safeway have risen steadily since mid-February, when the company’s management hinted that they were exploring a potential sale, although refusing to reveal details of the likely purchaser.

According to market reports, Cerberus Capital Management faced strong opposition in their bid Safeway from supermarket chain Kroger,  the largest in the United States with around  2, 600 supermarkets,  multi-department stores as well as 786 convenience stores trading under the banners of Kroger, Dillons and King Soopers stores.

Under the terms of the merger deal Kroger may still be entitled to submit a bid for Safeway, with Thursday’s deal, including a clause which allows for a “go-shop” period. In a “go-shop” situation the door is left open for other bidders to make a counter offer within a period of 21 days, with the possibility of that period being extended for an additional 15 days.

Industry observers have already pointed out that the likelihood of antitrust concerns were “significantly” reduced in the Cerberus-Safeway merger scenario than they would be if  Kroger acquired Safeway.

 

In the joint statement issued by the two companies, a positive picture was painted with  the scale of the combined operation, making it possible  to cut costs and which will eventually pass on to consumers. Whe combined group’s vast network of retail assets, distribution centers and manufacturing sites “will allow for a broader assortment of products, a more efficient distribution and supply chain, enhanced fresh and perishable offerings” summed up the joint statement.

Safeway logo

Stephen Feinberg  graduated from Princeton University in 1982  with a degree in politics.

Feinberg began his career in the financial world as a worked as a trader first with Drexel Burnham and later moving on to Gruntal & Co, regarded as being among the most prestigious and certainly the longest running US independent investment banking houses.

Feinberg left Gruntal & Co in 1992 to form an investment house in partnership with William L. Richter, with their new enterprise going under the title of Cerberus Capital Management.

With a “war chest” of just $10 million under management to get them going, Cerberus Capital Management slowly and steadily built up a strong client following, with some of the credit due to Feinberg’s shrewd hiring of former Vice President Dan Quayle. Over the years, Cerberus Capital Management, with Feinberg and Richter firmly holding the reins, has grown to become a significant player in the capital management scene, currently managing assets of around $20 billion.

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