Safeway to Buy 36-Store Grocery Chain in East
West Coast supermarket powerhouse Safeway Inc. on Tuesday agreed to buy closely held Genuardi’s Family Markets Inc. for an undisclosed sum to strengthen its presence in the East.
The purchase will give Safeway 36 stores in Pennsylvania, New Jersey and Delaware, 33 under the Genuardi’s name and three under its Zagara’s division. Genuardi’s has about $1 billion in annual sales and employs about 7,000 people.
Pleasanton, Calif.-based Safeway, which has bought chains from Texas to Alaska over the last few years, recently said it would pursue more acquisitions. U.S. grocers have been combining to cut costs and squeeze savings from suppliers to compete with discounters such as Wal-Mart Stores Inc. and Kmart Corp. that are selling more food.
“It’s a good acquisition,” said Andrew Wolf, an analyst with BB&T; Capital Markets in Richmond, Va. “They’ve sort of been in a fish-or-cut-bait situation on the East Coast, having only the Washington-Baltimore market.”
Most of Safeway’s stores, which include the Vons chain, are in the Western U.S., and the company plans to make more purchases in the East, Chief Executive Steve Burd said in a conference call. Pathmark Stores Inc., a New York City-area supermarket chain that emerged from bankruptcy protection recently, may be the next target, Wolf said.
Safeway’s shares fell $2.75 on Tuesday to close at $55.19 on the New York Stock Exchange.
Owning Genuardi’s is expected to add to Safeway’s earnings next year. The transaction will be paid for with cash from the sale of commercial paper, a form of short-term IOU, and is expected to close in the first quarter, Safeway said.
Safeway is forecast to earn $2.61 a share next year, the average forecast of analysts surveyed by First Call/Thomson Financial.
Once the purchase is completed, Safeway will have more than 1,700 stores and 200,000 workers in the U.S. and western Canada. The two companies combined will have $33 billion in sales in 2000, Safeway said. Hank Mullany, currently chief operating officer of Genuardi’s, will lead the Genuardi’s operation.
Norristown, Pa.-based Genuardi’s expects to add 2,000 jobs and build seven stores in the next year, Chief Executive Charles Genuardi said on the conference call. He and his family will give up managing the company after the sale, according to a Genuardi’s spokeswoman.
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Eastward Ho!
Supermarket operator Safeway, which has made a number of acquisitions in recent years, has made no secret of its plans to continue its expansion into the Eastern
U.S. to better compete with discount
retailers. Its stock has risen 54% this year.
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Safeway, monthly closes and latest on the New York Stock Exchange
Tuesday: $55.19, down $2.75
Source: Bloomberg News
