STELLARTON, Nova Scotia — Canadian food and drug retailer Sobeys Inc. plans to acquire Canada Safeway Ltd. for $5.8 billion (Canadian), a move that will boost not just its grocery business but also its pharmacy presence.
Under the deal announced late Wednesday, Sobeys will buy 213 Safeway supermarkets in western Canada, 199 in-store pharmacies with what Sobeys called "market leading productivity," 62 on-site fuel stations, 10 liquor stores, four distribution centers and related wholesale business, and 12 manufacturing facilities.
The Canada Safeway acquisition will give Sobeys, a subsidiary of Empire Company Ltd., more than 1,500 stores overall. Currently, Sobeys owns or franchises over 1,300 stores in all 10 provinces under such banners as Sobeys, IGA, Foodland, FreshCo, Thrifty Foods, and Lawtons Drugs, plus more than 260 retail fuel locations.
Sobeys currently has about 250 pharmacies, including the 78 Lawtons locations.
"The acquisition of Canada Safeway represents an excellent strategic fit, strengthening our presence in western Canada with the addition of great employees, excellent stores and exceptional real estate," Paul Sobey, president and chief executive officer of Empire, said in a statement.
"The acquisition allows us to leverage our existing assets and in turn position Sobeys to compete even more effectively within the changing, and increasingly competitive, grocery retail landscape," Sobey added. "Empire is committed to continuing its focus on food retailing and related real estate assets and will continue to own 100% of Sobeys, which will be a stronger food company with excellent growth prospects."
For the 52 weeks ended March 23, Canada Safeway generated about $6.7 billion (Canadian) in sales. Sobeys noted that the acquisition will make it a leading supermarket operator in western Canada, including the No. 1 grocer in the fast-growing Alberta market. In addition, Canada Safeway’s 9 million square feet of retail space includes prized locations, of which more than 60% are in Vancouver, Calgary, Edmonton and Winnipeg, Sobeys said.
"We are very excited by this acquisition and the future opportunities it presents. This is a win-win for both companies, as well as for our customers and employees," stated Marc Poulin, president and CEO of Sobeys.
"Sobeys expects to benefit from increased economies of scale. We anticipate capturing annual cost synergies of approximately $200 million within three years, through integrating and modernizing distribution networks, reducing cost in procurement, administration and marketing, and leveraging Sobeys’ IT infrastructure," he added.
Pending regulatory approvals and customary conditions, Sobeys expects the acquisition transaction to close this fall.
