Shareholders approve Safeway-Albertsons merger in California

Major mergers and acquisitions continue to take shape in the supermarket industry. In June we discussed a 14-percent increase in earnings per share after Kroger paid $2.9 billion for Harris Teeter Supermarkets. Kroger is currently the nation's largest supermarket chain.

Now a potential merger of Safeway and Albertsons could rival Kroger in size. Safeway shareholders recently met in Pleasanton to vote on a purchase offer from Albertsons, and the $9.2 billion sale was approved by 96 percent of shareholders. However, the Federal Trade Commission still has to review the transaction, and there was concern that the FTC may require some stores to close or be sold to competitors.

Of Safeway's 1,330 stores, 251 are in Northern California. Albertsons has about 600 locations, 181 of which are in Southern California. Safeway also operates 279 Vons stores in the southern part of the state, and it's the Vons-Albertsons overlap in Southern California that retail analysts believe could result in antitrust regulation from the FTC.

Safeway shareholders who attended the Pleasanton vote were also provided with materials regarding compensation for company executives. The merger would result in $7.5 million in stock for the former CEO, and the current CEO would be compensated with $25.3 million, along with $4 million in severance pay.

For a merger to be completed successfully and to the benefit of all parties involved, a shareholder and operating agreement must be carefully written. Such an agreement can address a wide range of issues, including business valuation, shareholder responsibilities, ownership rights, shareholder voting rights, guidelines for dispute resolution, and the nature of the business.

Our transactions overview has more on shareholder agreements.

Source: Los Angeles Daily News, "Albertsons to by Vons owner Safeway for $9.2 billion, could mean closure of Southern California stores," George Avalos, July 26, 2014

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