{"id":14033,"date":"2020-11-24T09:07:57","date_gmt":"2020-11-24T09:07:57","guid":{"rendered":"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/albertson-and-safeway-merging\/"},"modified":"2020-11-24T09:07:57","modified_gmt":"2020-11-24T09:07:57","slug":"albertson-and-safeway-merging","status":"publish","type":"post","link":"https:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/albertson-and-safeway-merging\/","title":{"rendered":"Albertson and Safeway merging"},"content":{"rendered":"<style type=\"text\/css\"><\/style><p>Albertson and Safeway merging<br \/>\n? Back to Original Article<br \/>\nAlbertsons parent Cerberus is buying Safeway for more than $9 billion<br \/>\nIf the deal is approved, the grocer would close in on Kroger as the nation\u2019s biggest.<br \/>\nMarch 06, 2014|By Tiffany Hsu<br \/>\nAlbertsons is making a play for the top spot in the U.S. grocery industry with the purchase of rival Safeway for more than $9 billion in cash and stock.<br \/>\nSafeway, now the second-largest chain behind Kroger Co., owns the Vons and Pavilions brands in Southern California. With the purchase, Albertsons would operate more than 2,400 stores, compared with Kroger\u2019s 2,640.<br \/>\nThe companies said no stores would be closed as part of the transaction, although executives said that the Federal Trade Commission could require divestitures. The combined entity would employ more than a quarter of a million workers, giving it one of the largest head counts in corporate America.<br \/>\nWall Street seemed cheered by the much-rumored acquisition, which many analysts saw as a necessary step in a cutthroat market increasingly crowded with competitors.<br \/>\n\u201cConsolidation like this was certain to happen,\u201d said Jason Moser, an analyst with the Motley Fool. \u201cThis is a total scale play in an industry where scale is what matters the most.\u201d<br \/>\nSome consumer advocates worried that growing consolidation among grocery chains could lead to fewer choices and higher prices, even though the two supermarket companies took pains to emphasize the benefits to customers.<br \/>\n\u201cIt\u2019s scary, as if Coke and Pepsi got together,\u201d said Jamie Court, president of Consumer Watchdog, a Santa Monica advocacy group. \u201cThis is really a threat to consumers\u2019 getting the lowest prices and the best services. Companies always say there\u2019s economy of scale, but in our view, less competition always equals higher prices.\u201d<br \/>\nThe deal with Albertsons would give Safeway investors $40 a share, including $32.50 a share in cash.<br \/>\nBoard members of Safeway, based in Pleasanton, Calif., unanimously approved the transaction, which is expected to close in the fourth quarter, assuming it passes muster with antitrust regulators.<br \/>\nAlbertsons, of Boise, Idaho, is owned by private equity firm Cerberus Capital Management and other investors, which is offering the proposal through its AB Acquisition arm.<br \/>\nAlbertsons Chief Executive Robert G. Miller would serve as executive chairman of the resulting company, while Robert Edwards, currently chief executive of Safeway, would be chief executive.<br \/>\nConsumers are increasingly diversifying their grocery shopping, spreading their purchases among multiple retailers instead of sticking to one stop at a single supermarket, Miller told reporters in a Thursday conference call.<br \/>\nThe marriage would help both companies retain positions of power in a grocery industry that includes home-delivery companies, online food retailers such as Amazon Fresh, upscale supermarkets such as Whole Foods and more, he said.<br \/>\n\u201cThe way people shop for groceries has fundamentally changed,\u201d Miller said. \u201cWe have to adapt.\u201d<br \/>\nHe added that a combined Safeway and Albertsons would lead to \u201csubstantial cost savings\u201d and fresher and higher-quality products resulting from a more efficient purchasing and distribution system.<br \/>\nMore than 19% of market share in the U.S. grocery industry belongs to Kroger, whose chains include Ralphs and Food 4 Less, according to Euromonitor International.<br \/>\nSafeway, which has 1,335 stores, follows with 9.1%. The Publix and H.E.B. chains are next, with Albertsons and its 1,075 stores closing out the top five with a 3.8% share.<br \/>\nLast year, a Cerberus-led investor group spent $3.3 billion in cash and debt assumption buying 887 stores from Supervalu Inc., with the names Albertsons, Acme, Jewel-Osco, Shaw\u2019s and StarMarket. Cerberus already owned some Albertsons stores, which it bought in 2006.<br \/>\nIn the fall, Albertsons said it would buy 50 stores operated by Texan chain United Supermarkets.<br \/>\nBut Albertsons hasn\u2019t been the only grocery business in expansion mode. In the summer, Cincinnati-based Kroger said it would spend $2.5 billion for Harris Teeter Supermarket Inc. and its more than 200 units.<br \/>\nMoody\u2019s analyst Mickey Chadha said Safeway \u2014 which owns 45% of its stores \u2014 offered an appealing real estate portfolio, he said.<br \/>\nBut he acknowledged that Safeway represents a \u201cbig acquisition, and it includes a huge amount of integration and execution risk.\u201d<br \/>\nChadha was skeptical of concerns that a shrinking pool of grocery brands would result in more expensive supermarket visits for the average American.<br \/>\n\u201cFrom the consumer standpoint, it\u2019s not a bad thing,\u201d he said. \u201cThere\u2019s so much competition in this space that you can\u2019t be increasing pricing. There\u2019s a lot of alternatives out there for shoppers.\u201d<br \/>\nSafeway will benefit from Cerberus\u2019 involvement, said Moser of Motley Fool. The chain\u2019s stores \u201care in need of a modern-day makeover.\u201d<br \/>\n\u201cCerberus will upgrade those stores that are so badly in need of it, and maybe down the road they\u2019ll spin this entity out as a publicly traded company,\u201d Moser said.<br \/>\nMore grocers are likely to follow the Safeway and Albertsons game plan, said Andrew Wolf, an analyst with BB&amp;T Capital Markets.<br \/>\nWhen discounters such as Wal-Mart entered the grocery space, competitors were quickly shunted into two categories: \u201cthriving survivors\u201d such as Kroger, which brought their prices down, or companies such as Albertsons and Safeway that were \u201calive but not growing their earnings,\u201d he said.<br \/>\n\u201cMost of the unionized industry has been in a slowly liquidating situation,\u201d he said. \u201cThat\u2019s where a deal like this can be constructive, where one plus one can equal two and a half.\u201d<br \/>\nIn the acquisition agreement announced Thursday, Safeway shareholders would get $32.50 a share in cash and the right to an estimated $3.65 a share from asset sales. Shareholders also would receive shares of gift-card firm Blackhawk Network Holdings Inc., in which Safeway owns a stake, valued at an estimated $3.95 a share.<br \/>\nThe total $40-per-share value of the deal represents a 72% premium over the share price a year ago before Safeway first began a strategic review and 17% from April 18, the day before the company divulged that it was considering a sale.<br \/>\nApplication of course material:<br \/>\n1. The article covers the merger of Albertsons and Safeway. Two of the largest grocery stores in America. Once you have selected either article, you will need to write a summary of the article. The summary should include the major points of the article and how it relates to the material covered in class.<br \/>\n2. Using the Supply And Demand framework, you will need to show how the merger will change the Supply and Demand model. In the analysis, you need to discuss the changes in price and quantity. There are two things to consider, assume the Demand curve stays constant and just the Supply curve shift.<br \/>\n3. Conclude with agreeing or disagreeing with the merger in the article. Include your reasons why you either support or don\u2019t support the purposed merger by using material discussed in class.<\/p>\n<p>&nbsp;<\/p>\n<p><center><a href=\"http:\/\/onlineclassesguru.com\/orders\/ordernow\"><img decoding=\"async\" src=\"https:\/\/encrypted-tbn0.gstatic.com\/images?q=tbn:ANd9GcTyj99p60XCLyLk1htB7-1neRt8-2QdnenNlQ&usqp=CAU\"target=\"_http:\/\/onlineclassesguru.com\/orders\/ordernow\"\/><\/center><p>","protected":false},"excerpt":{"rendered":"<p>Albertson and Safeway merging ? Back to Original Article Albertsons parent Cerberus is buying Safeway for more than $9 billion If the deal is approved, the grocer would close in on Kroger as the nation\u2019s biggest. March 06, 2014|By Tiffany Hsu Albertsons is making a play for the top spot in the U.S. grocery industry&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14033","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v17.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Albertson and Safeway merging - onlineclassesguru<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/albertson-and-safeway-merging\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Albertson and Safeway merging - onlineclassesguru\" \/>\n<meta property=\"og:description\" content=\"Albertson and Safeway merging ? Back to Original Article Albertsons parent Cerberus is buying Safeway for more than $9 billion If the deal is approved, the grocer would close in on Kroger as the nation\u2019s biggest. 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