Sobeys Buys Canada Safeway

News & Discussion from the grocery retailers in the Canadian provinces & territories
Post Reply
kr.abs.swy
Personnel Manager
Personnel Manager
Posts: 272
Joined: March 17th, 2009, 5:32 pm
Been thanked: 1 time
Status: Offline

Safeway selling Canada stores to Sobey's

Post by kr.abs.swy »

Safeway and Sobey's announced that Sobey's will be buying all of the Canada Safeway stores. This will erase Safeway from a huge swath of Western Canada. Safeway has hinted recently that something like this could happen.

http://m.theglobeandmail.com/report-on- ... ice=mobile

Safeway is getting a lot of money, some of which they have said will be used to pay down debt and some of which they say they plan to use for strategic initiatives. I wonder what they have in mind. It doesn't seem completely impossible that they might use some of that money to opportunistically pick off a few Albertsons stores from Cerberus, although given that their debt has increased by $1 billion over the past couple of years, it would be a good idea to focus on debt reduction.
jamcool
Store Manager
Store Manager
Posts: 1013
Joined: March 5th, 2009, 10:27 pm
Been thanked: 50 times
Status: Offline

Re: Safeway selling Canada stores to Sobey's

Post by jamcool »

Safeway still has a 49% interest in the Ley chain in Mexico
Alpha8472
Posts: 3904
Joined: February 24th, 2009, 8:55 pm
Been thanked: 78 times
Status: Offline

Re: Safeway selling Canada stores to Sobey's

Post by Alpha8472 »

Safeway has been in Canada for a long time. There are still some really old Marina style Safeway stores in Canada.

Who knows if Sobeys will keep those stores open. In recent years, Safeway has been replacing those old stores with brand new ones in Canada. Safeway spent a lot of money to remodel their Canadian stores into the Lifestyle format. Will Sobeys transform them with their own decor? Safeway's decor is mostly brown and dark looking. Sobey's focuses on high ceilings and a brighter look.

http://www.elanconstruction.com/projects/sobeys.php
bm10k
Status: Offline

Sobeys Buys Canada Safeway

Post by bm10k »

http://www.theglobeandmail.com/report-o ... e12499648/

Looks like Safeway is focusing on it US Stores
User avatar
submariner
Founder of RetailWatchers.com
Founder of RetailWatchers.com
Posts: 571
Joined: February 22nd, 2009, 10:35 am
Location: Canberra, ACT, Australia
Has thanked: 5 times
Been thanked: 24 times
Contact:
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by submariner »

(I've merged the two topics here into the "International" forum)
Alpha8472
Posts: 3904
Joined: February 24th, 2009, 8:55 pm
Been thanked: 78 times
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by Alpha8472 »

Safeway used to have stores in England and Australia. They left those countries years ago and sold those division. At the time, it was probably a good idea as running business operations in a far off country was difficult. Canada on the other hand was so close to the U.S. that it probably wasn't too difficult to manage the Canadian stores.

I think that the Canadian division just wasn't very profitable for Safeway. Safeway needed the money and sold the Canadian stores for some quick money. I think that Canadian shoppers will benefit from this. From what I have heard, Sobeys is cheaper than Safeway. Safeway has some good sale prices, but their regular prices are on the high side.

Safeway is a well known brand in Western Canada and I think that some people will miss the Safeway name.

On the other hand, there are some middle of nowhere towns in Canada where the only place to grocery shop is Safeway. Safeway has a monopoly in those towns and charges whatever prices it wants.
storewanderer
Posts: 14271
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 289 times
Contact:
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by storewanderer »

Safeway was getting 40% of it's total company profits from Canada... 40%!!! It looks to me like this was their MOST profitable division.

I thought NorCal was most profitable. Maybe it is. If so the other divisions must be real stinkers. I would think Vons would be a good contributor.
Alpha8472
Posts: 3904
Joined: February 24th, 2009, 8:55 pm
Been thanked: 78 times
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by Alpha8472 »

Wow! I did not know that it was 40%. That is crazy. Are they trying to put themselves out of business or what? Is Safeway headed toward some kind of sell off or total buyout? Something is brewing at Safeway and they are not talking.
kr.abs.swy
Personnel Manager
Personnel Manager
Posts: 272
Joined: March 17th, 2009, 5:32 pm
Been thanked: 1 time
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by kr.abs.swy »

Alpha, they received a very good offer for these stores. According to the press accounts, they hadn't actively been working to sell the Canada stores, but Sobey's came to them with an offer to buy the stores at a very good price. Safeway is valued (on an enterprise value basis) at 5 times EBITDA. I think I read somewhere (but I couldn't find the article, so there is a possibility that I am remembering incorrectly) that they are selling the Canada stores at a multiple of 10 times EBITDA.

Sobey's was able to offer that price because they think there are huge opportunities with the Safeway stores and they will give them massive scale in BC and Alberta. A Metro executive said that they would have been interested in the stores also, but not at the price that Sobey's is paying. Sobey's made them an offer that they couldn't refuse, and they did a deal. I don't think there is anything more to the story than that. Getting the amount they got for these stores was a major coup for Safeway management.

The Canada stores were exceptionally profitable for Safeway, and there is no doubt that they are selling one of their crown jewels. But they are getting a good price for them and will use some of the proceeds to pay down debt.
storewanderer
Posts: 14271
Joined: February 23rd, 2009, 3:54 pm
Has thanked: 2 times
Been thanked: 289 times
Contact:
Status: Offline

Re: Sobeys Buys Canada Safeway

Post by storewanderer »

It will be very interesting to see how this whole thing plays out. It is a lot of cash and could do a lot operationally for Safeway if part of it was used for price decreases and adding some labor to the stores so they can execute better.

At the same time I fear this move is going to "expose" just how bad off much of Safeway's United States business is doing (perhaps worse than I thought it was doing) and in an effort to appease the markets, Safeway will continue to do the wrong things like cut labor and increase prices to get margins up and expenses down, all at the cost of sales and marketshare.

Time for the company to go private.
Post Reply