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Sobeys will buy Safeway’s Canadian operations for about $5.8 billion Canadian dollars in cash, Safeway announced this week.
Safeway said it would use proceeds of the sale to pay down $2 billion in debt and buy back stock.
In the year ending March 23, Canada Safeway’s revenues were $6.7 billion Canadian, with a $428 million Canadian profit. It included about 220 stores, according to one analyst.
Safeway CEO Robert Edwards told analysts on a conference call that the Canadian assets were strong, but the deal was right to make.
“We’re very, very proud of the assets,” Edwards said, according to transcripts of the call from Seeking Alpha. “Our management team in Canada has done a great job in creating such a strong business, and an auction process was not run. And this was an unsolicited offer.
“And as we have thought about that offer on these assets and reflected about the interest that has been expressed in the assets over time, we believe that this was an extremely attractive offer and that it offered a substantial premium to the market multiples for U.S. retailers. … And so based on the analysis that we did, we believe that this transaction maximized the value of our Canadian assets.”
The deal has been approved by the boards of directors at both companies, Safeway said, and is expected to close in the fourth quarter.