February 19, 2014

Tom Thumb parent in talks over possible sale of company

Safeway, based in Pleasanton, Calif., said discussions are ongoing and that no agreement has been reached.

Safeway, which owns the Tom Thumb supermarket chain, says it’s in talks on a possible sale of the company.

The Pleasanton, Calif., supermarket operator said Wednesday that discussions are ongoing and that it isn’t certain they will end in a deal.

Because of the developments, the company is postponing its annual investor conference, which had been set for early March.

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.

Safeway has been trying to adapt to a changing supermarket industry, with people increasingly doing their shopping at big-box stores like Target, drugstores and even dollar stores.

This September, the company disclosed that it adopted a “poison pill” plan to prevent a hostile takeover. That move came as activist hedge fund Jana Partners had amassed a significant amount of Safeway’s stock. Jana Partners had said it talked with the company about strategic alternatives, such as exiting regions that aren’t profitable.

The New York Times reported Wednesday that Safeway, which the paper said has a total enterprise value of $13.5 billion, has had on-and-off talks with private equity firms since last year. One of them, Cerberus Capital Management, is said to be the lead suitor this time around, according to Reuters.

Last year, Cerberus acquired Supervalu, another supermarket chain, for $3.3 billion.

Safeway’s disclosure came as the company reported a quarterly profit that beat Wall Street expectations, although sales fell short of expectations. Investors sent the stock (ticker: SWY) up almost 4 percent to $35.98 in after-hours trading.

The company also said it will distribute the remaining shares it owns of Blackhawk Network Holdings to Safeway shareholders. Safeway took the gift- and prepaid-card unit public in March and still owns about 72.2 percent of Blackhawk.

For the three months that ended Dec. 28, Safeway earned $3.31 billion, or $13.46 per share. Excluding various one-time items, it earned 53 cents per share, above the 47 cents that Wall Street expected. Results in the latest quarter were boosted by more than $3 billion from discontinued operations — the Canadian stores it sold during the quarter.

Revenue rose less than 1 percent to $11.31 billion, short of the $11.49 billion expected by analysts.

Looking to 2014, the company said it expects sales at established locations to rise 1.5 to 2.5 percent. Earnings per share are expected to be $1.15 to $1.35, versus the $1.66 expected by analysts.

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