Safeway Gives Sobeys Advantage In Western Canada

Safeway Canada's unsurprising takeover by the country's #2 grocery chain, Sobeys gives Sobeys the boost it desperately needs in the West (very little organic growth last couple years despite only a couple large format stores in BC; only 2 new Sobeys stores opened in Alberta in 2011; total Alberta locations down 15 year ended May 2013);

but it may have to divest a handful of stores due to it having 'too dominant a position' in several communities including in and around Calgary.  Between the banners Sobeys and IGA, Empire Company already operates 90 grocery stores province-wide (May 2013) with most located in the Calgary area.

For Safeway Calgary is home to 32 grocery stores and 5000 employees - Alberta is home to 85 Safeway stores and 13,500 employees (45% of total, includes 630 head office jobs).  Combined, Safeway and Sobeys will have 175 grocery stores versus 84 for Loblaw Companies.  In some communities the disparity is even wider with Sobeys-Safeway operating as many as three times the number of stores run by other chains.  This will probably have repercussions as the Competition Bureau is expected to force Sobeys to divest a number of locations, perhaps as many as 10 in and around Calgary.

According to Empire Company latest fiscal report for the year ended May 2013, there are 1300 non-gas locations (down 15 from last year) including 36 wine and beer stores (all in Alberta - Safeway acquisition gives it another 10 beer stores in the province for a total of 46 in Alberta).

More on the Sobeys Safeway Deal

Deal was agreed to by both parties on June 12, 2013.  It includes 213 grocery stores, 10 liquor stores (all in Alberta), 199 in-store pharmacies, 62 gas stations.  Only six of the stores are outside Western Canada (Ontario).  Year ended March 2013 Safeway Canada had revenues of $6.7 billion (was $5.3 billion two years earlier).  Sobeys agreed to pay $5.8 billion cash with $1.0 billion coming from asset sales $255m of which has already been raised through its divesture of Empire Theaters - owned since 1984 - Cinema business was part of investments/other division the source of 1.2% of total company revenue in fiscal 2013.

Excluding safeway stores and Shell/Fast Fuel gas-only locations, Empire Company locations down 1315 -> 1300 (year to May 4, 2013).  Provinces where net addition was made to number of Sobeys stores - Quebec +11, British Columbia +3, New Brunswick +2.  Net loss in store count - Alberta -15, Ontario -7, Newfoundland -3, Manitoba -1.

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