Business

February 20, 2014

Several private equity firms in buyout talks with Tom Thumb’s parent

CVC Capital Partners, Leonard Green & Partners and Cerberus Capital Management are among the investment firms discussing a possible buyout of Safeway.

CVC Capital Partners and Leonard Green & Partners are among the firms in talks with Safeway, which owns the Tom Thumb supermarkets, about buying some or all of the grocery chain as it weighs a sale, people with knowledge of the matter said.

Cerberus Capital Management, the majority owner of the Albertsons chain, is also discussing options with the retailer, said one of the people, who asked not to be identified because the process is private. While the firms are looking at acquiring the entire company, they’re more interested in cherry-picking assets in certain regions, such as California, said the people. Goldman Sachs Group is working with Safeway as it explores possibilities, one person said.

Safeway, the second-largest U.S. grocery-store chain, said Wednesday that it’s in talks about a potential sale of the company as it divests some assets and struggles to increase revenue. No agreement has been reached and there is no assurance a deal will be completed, the Pleasanton, California-based company said in the statement.

KKR & Co. bought Safeway in 1986 for about $4.3 billion, according to data compiled by Bloomberg. The retailer went public in 1990.

Safeway has more than 1,300 U.S. locations, including 107 in Texas doing business as Randall’s and Tom Thumb, according to its website. Houston-based Randall’s Food Markets bought Dallas-based Tom Thumb in 1992, and Safeway acquired Randall’s in 1999.

Leonard Green and CVC, which jointly own big-box wholesale chain BJ’s Wholesale Club Inc., could team up to do a deal, one of the people said.

Representatives for CVC, Leonard Green, Cerberus, KKR and Goldman Sachs declined to comment. Brian Dowling, a spokesman for Safeway, didn’t immediately respond to a phone call and e-mail seeking comment.

Safeway has been trying to adapt to a changing supermarket industry, with people increasingly doing their shopping at big-box stores like Target and Walmart. It recently sold its 72 Dominick’s stores in the Chicago area after divesting its Canadian business and conducting an initial public offering of gift-card unit Blackhawk Network Holdings Inc.

The company said that sales rose 0.2 percent to $36.1 billion last year as U.S. supermarket revenue stagnates. Researcher IBISWorld in July projected sales at U.S. grocers would increase 0.2 percent to $517.8 billion in 2013 after declining 0.4 percent in 2012.

Kroger Co., based in Cincinnati, is the largest U.S. supermarket chain.

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