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Cerberus Capital Management Buys Safeway For $9.4 Billion

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Grocery stores have been under competitive threat from big box stores, but they are a great business to be in, according to what happened on Thursday.

Safeway Inc, the second-largest U.S. grocery store chain, said private equity firm Cerberus Capital Management, the parent company of Albertsons, will buy the company for $9.4 billion.

With 1300 locations, Safeway is a large business, but they have been unable to make great strides because of their overheads, which generally mean they don't always have low enough prices.

Safeway has union employees, but it is as yet unknown what this means for the unions and for the union employees.

Cerberus announced that they do not expect to close any Safeway stores, a good thing for most employees.

This is not the first recent buy for Cerberus. A year ago, Cerberus led an investor group to acquire Supervalu Inc, including Albertsons and Jewel-Osco, for $3.3 billion.

The Cerberus offer price is $40 per share, a premium of 1.3 percent to Safeway's stock price, which closed on Thursday at $39.47 on the New York Stock Exchange.

This is a massive acquisition that more than doubles the Cerberus supermarket chain holdings. The addition of Safeway and Albertsons creates a dominant grocery franchise on the West Coast, a network of more than 2,400 stores and 250,000 employees.

Safeway shareholders will receive $32.50 per share in cash plus other distributions with a value of $3.65 per share.

Cerberus obviously thinks they can improve their bottom line by buying in bulk and making other savings in running the bulked-up company. Only time will tell, but Cerberus looks like a company to watch.

Dwight L. Schwab Jr. is a moderate conservative who looks at all sides of a story, then speaks his mind. His BS in journalism from University of Oregon with minors in political science and American history stands him in good stead for his writing. Read more stories by Dwight L. Schwab Jr. If you enjoyed this column, may I suggest you press the SUBSCRIBE button? It's FREE. Thank you for your patronage. You can also send comments to: dwight.schwab@gmail.com.

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