Safeway Inc. will sell its supermarket operations in Canada to food retailer Sobeys for 5.8 billion Canadian dollars ($5.7 billion).
Sobeys, a unit of Empire Company Limited, said the deal includes 213 grocery stores under the Safeway banner in western Canada, 10 liquor stores, 12 manufacturing facilities and four distribution centers.
That leaves Safeway with about 1,400 supermarkets in the U.S., with many of those in western states. The company, based in Pleasanton, Calif., operates stores under names including Vons in Southern California and Nevada, and Randalls and Tom Thumb in Texas.
“This was an unsolicited offer,” CEO Robert Edwards said in a brief call with analysts after the announcement. He noted that the company believed the offer was “extremely attractive.”
Edwards, who took over as CEO last month, declined to discuss how the sale would affect the company’s strategy for its U.S. business. Over the past year, the company has been touting a new loyalty program called “Just For U” as a centerpiece of its plan to beat back competitors and gain market share. Like many other retailers, Safeway believes a sophisticated loyalty program can give it an edge at a time when big-box retailers like Target, drug stores and even dollar stores are expanding their grocery sections to attract customers.
Edwards said the company would field questions about the impact of the sale on its U.S. business in about five weeks, during its next quarterly earnings call.
After taxes and expenses, Safeway said proceeds from the deal are expected to be 4 billion Canadian dollars. Safeway said proceeds will be used to pay down $2 billion in debt and to buy back stock. It also said some of the proceeds may be used to invest in “growth opportunities.”
The transaction is expected to close in the fourth quarter and is subject to regulatory approvals.
Safeway shares rose $8.74, or 37.8 percent, to $31.85 in after-hours trading.