The proceeds from this transaction are expected to be used to pay down $2bn of debt, with the majority of the remainder to be used to buy back stock. In addition, some of the proceeds may be used to invest in growth opportunities.
In the trailing 12 months ended 23 March 2013, Canada Safeway’s revenues were C$6.7bn. In addition, Canada Safeway’s operating profit was C$428m and EBITDA was C$544m, both adjusted for inter-company related transactions.
Canada Safeway will be accounted for as discontinued operations beginning in the second quarter of 2013. Safeway Inc remains responsible for Canada Safeway’s C$300m in public debt due March 2014, which is not included in the transaction, and will also retain cash and other receivables in a similar amount in Canada.
“We are pleased to enter into this agreement with Sobeys in order to realise the higher multiples attributed to Canadian supermarket companies,” said Robert Edwards, president and CEO of Safeway Inc. “The substantial cash proceeds from this transaction will allow us to create value for Safeway stakeholders and contribute to the growth of the ongoing business.”
The transaction has been approved by the boards of directors of both companies. The transaction is anticipated to close in the fourth quarter of 2013 and is subject to customary closing conditions, including approval under the Competition Act (Canada).
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