OTTAWA â€" The Canadian retailer Sobeys said on Wednesday that it would pay $5.8 billion in cash for the Canadian operations of Safeway, a move that will make it the leading grocery chain in western Canada.
Sobeys, which is based in Stellerton, Nova Scotia, has used a series of takeovers to become the second-largest grocery chain in Canada after the Loblaw Companies of Toronto. While it has long been rumored that Safeway might leave the Canadian market, the sale came as something of a surprise.
During a conference call with investors, executives from Sobeys and the Empire Company, the publicly traded holding company that owns the grocer and is controlled by the Sobey family, declined to discuss how the deal was reached with Safeway, which is based in Pleasanton, Calf. But they were quick to dismiss analysts’ suggestions that Sobeys might find itself in a bidding war for the 213 Canada Safeway stores.
“This is a done deal,†Marc Poulin, the president and chief executive of Sobeys, said during the call.
In eastern Canada, Sobeys has followed store acquisitions with extensive renovations, rebranding and the construction of efficient and highly automated food distribution warehouses. Like Loblaw and Safeway, it has also focused heavily on the development of private label-brands, particularly those with high margins. During the conference call, it outlined similar plans for the Canada Safeway properities.
While Sobeys does operate stores in western Canada, it has lagged behind Safeway and Loblaws in the region, particularly oil-rich Alberta. With the acquisition, Sobey estimated that it would generate annual revenue of about $24 billion and would run about 1,500 stores nationwide.
As part of the takeover, Sobeys will sell and then lease back about 4.8 million square feet of store space now owned by Safeway Canada and valued at $1.8 billion. During the conference call, the company suggested that the buyer would be Crombie, a real estate investment trust partly owned by Empire, which owns several Sobeys properties.
While the Canada Safeway stores are comparatively few in number, most of them are large and situated in prime locales.
Sobeys and Loblaws may both be controlled by their founding families, but they have distinctly different styles. The Westons of Toronto, who control Loblaw, are prominent members of Canadian society and have expanded their family holdings globally to include famous operations like Selfridge’s department store in London.
The leaders of the Sobey family, who all hold positions in the company, have stuck to Canada and live relatively modest and low-profile lives in Stellerton, a coal mining town that is something of a backwater even in Nova Scotia.
