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    Safeway in Discussions for Possible Sale

    Reuters cites Cerberus as likely suitor

    In the wake of divesting unprofitable assets last year including 72 Dominick's in the Chicago market, Safeway Inc. put to rest rampant speculation by announcing it is in ongoing discussions to be sold. It did not divulge any further information, including who the interested party is, and also made clear there is no assurance that the discussions will lead to an agreement or a completed transaction.

    Reuters reports that private equity firm Cerberus Capital Management LP is the likely suitor, citing a source familiar with the deal.

    Separately, the nation's second largest supermarket chain said it will distribute the remaining 37.8 million shares it owns of its prepaid payment network, Blackhawk Network Holdings (approximately 72.2 percent), to Safeway stockholders while also exploring ways to monetize its 49 percent stake in Mexican retailer, Casa Ley SA de CV.

    In terms of the Blackhawk share distribution, Safeway said the current plan calls for the dispersal to be conducted on a pro rata basis to all Safeway stockholders in a tax-free transaction. However, the company said if it consummates a sale, the share distribution may be taxable, and that the timing and additional details of the proposed distribution will be determined in the near future, at which time further announcements will be revealed.

    Q4, Full-year Results

    Safeway also reported its fourth-quarter and full-year financial performance, posting Q4 2013 sales and other revenue of $11.3 billion, compared to $11.2 billion for the same time last year. The company said an identical-store sales increase (excluding fuel) of 1.6 percent was largely offset by a decline in fuel sales.

    Net earnings were $100 million for Q4 2013, or 35 cents per diluted share, compared to $170.7 million, or 71 cents per diluted share, for Q4 2012. Gross profit increased 20 basis points to 26.52 percent of sales in Q4 2013 compared to 26.32 percent of sales during the same time last year.

    Safeway’s full-year sales were $36.1 billion in 2013, essentially flat compared to $36.1 billion in 2012. Identical-store sales increases of 1.7 percent were offset by lower fuel sales and the disposition of Genuardi's stores in Philadelphia. Same-store sales increased 0.8 percent in 2012, and gross profit margin increased four basis points to 26.27 percent in 2013 from 26.23 percent in 2012.

    Additionally, income from continuing operations for the fiscal year 2013 was $246.3 million, or 95 cents per diluted share, compared to $294.6 million, or $1.18 per diluted share in 2012.

    "We are pleased with the progress we made in 2013," said Robert Edwards, Safeway's president and CEO. "Strategies to grow sales and improve operating profit dollars have begun to produce results. In 2013, we generated our best volume growth since 2006, and we had our best identical-store sales growth in the last five years. At the same time, we continue to pursue strategies to enhance momentum and increase shareholder value. We look forward to continuing progress in 2014."

    Pleasanton, Calif.-based Safeway operates 1,335 stores in the United States.

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