Safeway Puts Up Defense After Hedge Fund Amasses Stake

The grocer Safeway has gone on the defense days after the activist hedge fund Jana Partners declared a 6.2 percent stake in the company.

Safeway, based in Pleasanton, Calif., said on Tuesday that it had put into place a “poison pill” to prevent investors from acquiring more than 10 percent of the company.

Its shares rose on Tuesday by 10.5 percent to $30.99, their highest level in more than a year.

The $6 billion hedge fund Jana Partners is known for taking a behind-the-scenes approach to its campaigns, amassing large stakes in companies and agitating for change through talks with management.

The fund has turned its focus to Safeway, where it recently encouraged the board to conduct a strategic review and consider selling some of its assets, said a person familiar with the firm, who was not authorized to speak about its actions.

Last week, Jana Partners disclosed it had a 6.2 percent stake in a filing with the Securities and Exchange Commission, making it one of Safeway’s biggest shareholders.

Jana said Safeway’s shares were undervalued and submitted a list of demands for the board. These include returning “a significant” amount of capital to shareholders, shutting down stores in regions where Safeway’s profit margins are lower, and transferring the company’s 73 percent stake in Blackhawk Network, its gift card business, to shareholders.

Safeway responded on Tuesday by highlighting recent “strategic initiatives” the board had undertaken, including agreeing to sell its Canadian stores and putting Blackhawk through an initial public offering.

It said a “poison pill” had been put in place to ensure it could continue to carry out its strategic plan.

Both Jana Partners and Safeway declined to comment further.

Jana’s focus on Safeway comes amid a spurt of corporate activism as investors try to change companies through their investments. Hedge funds have been among the biggest group to flex their muscles.

Last week, the auction house Sotheby’s announced that it would review its financial policies after three hedge funds, Third Point Capital, Trian Partners and Marcato Capital, acquired large stakes in the company.