TORONTO – Supermarket chain operator Empire Co. Ltd. (TSX:EMP.A) plans to acquire the Canadian assets of grocer Safeway for $5.8 billion.
The Nova Scotia-based parent of the Sobeys chain said Wednesday that the cash deal will boost its presence in Western Canada and give it $1.8 billion of real estate.
The transaction to buy Canada Safeway Ltd., which has 213 stores, will be completed through its wholly-owned Sobeys Inc. subsidiary. Included in the transaction are 199 in-store pharmacies and 62 gas stations on the Safeway properties.
“The acquisition allows us to leverage our existing assets and, in turn, positions Sobeys to compete even more effectively within the changing and increasingly competitive grocery retail landscape,” Empire Co. president and CEO Paul Sobey said in a release.
Major U.S. retail players like Walmart (NYSE:WMT) and Target (NYSE:TGT) have been making inroads in Canada with a broad selection of food items in their stores.
Safeway Inc. chief executive Robert Edwards told analysts in a conference call that the offer to buy its Canadian operations came directly from Empire Co.
“An auction process was not run and this was an unsolicited offer,” he said.
“We believe that this transaction maximized the value of our Canadian assets.”
Empire Co. will also own 10 liquor stores, four distribution centres and 12 manufacturing facilities as part of the deal.
The company expects the transaction to immediately add to Empire’s adjusted net earnings per share and that it will have cost synergies of $200 million a year within three years.