NEW YORK (The Deal) -- Safeway (SWY) could be the latest player to join the wave of consolidating grocery chains after confirming it is considering possible transactions, and sources said they believe it could draw interest from rival Kroger (KR) in addition to various private equity firms.
Pleasanton, Calif.-based Safeway on Wednesday confirmed that it is engaged in discussions regarding a potential sale of the company.
In addition, Safeway revealed plans to pursue strategic options for its 49% stake in Mexican grocery store chain Casa Ley SA and its intentions to distribute its remaining 27.8 billion shares in the Blackhawk Network Holdings Inc. gift card business to shareholders.
The announcement by Safeway, which has been facing shareholder pressure to improve financial results, comes amid increasing deal activity in the grocery and supermarket space over the past couple of years.
Among recent deals on the larger side have been Kroger's $3.54 billion acquisition of Harris Teeter Supermarkets Inc. on July 9, representing an enterprise value-to-Ebitda multiple of about 7.33. SuperValu Inc., on Jan. 10, 2013, sold its five retail chains - Albertson's LLC, Acme, Jewel-Osco, Shaw's and Star Market - to an investor group led by Cerberus Capital Management LP for $3.3 billion in cash and assumed debt.
More recently, on Sept. 10, Albertson's agreed to buy family-owned Texas grocery chain United Supermarkets LLC.
Financial terms weren't disclosed, but one source said at the time that Albertson's likely paid between 6.2 times to 7 times United Supermarket's trailing 12-month adjusted Ebitda.