Sobeys to Acquire Canada Safeway

Empire Company Limited and its wholly-owned subsidiary, Sobeys have announced that Sobeys has reached a definitive agreement with Safeway to acquire substantially all of the assets of Canada Safeway Limited for a cash purchase price of Cdn. $5.8 billion, subject to a working capital adjustment, plus the assumption of certain liabilities.

Paul D. Sobey, President and CEO of Empire said, “This is a significant and historic event for Sobeys, which has been proudly serving Canadian food shoppers for 106 years. The acquisition of Canada Safeway represents an excellent strategic fit, strengthening our presence in Western Canada with the addition of great employees, excellent stores and exceptional real estate.

“The acquisition allows us to leverage our existing assets and in turn position Sobeys to compete even more effectively within the changing, and increasingly competitive, grocery retail landscape. Empire is committed to continuing its focus on food retailing and related real estate assets and will continue to own 100 percent of Sobeys which will be a stronger food company with excellent growth prospects.”

Transaction Overview and Rationale
The assets to be purchased by Sobeys include the following:
• 213 full service grocery stores under the Safeway banner in Western Canada;
• 199 in-store pharmacies with market leading productivity;
• 62 co-located fuel stations;
• 10 liquor stores;
• 4 primary distribution centres and the related wholesale business; and
• 12 manufacturing facilities.
115 King Street • Stellarton, NS • BOK 1S0 2

The acquisition of Canada Safeway represents a unique and highly strategic opportunity for Sobeys to leverage its existing asset base. Management believes that, for several reasons, including those described below, the transaction will significantly enhance Sobeys’ scale, while creating an opportunity to realize meaningful synergies and earnings accretion:

• Creates a new growth platform for Sobeys
• Positions Sobeys as a leading grocer in Western Canada and the #1 grocer in the fast-growing Alberta market
• Solidifies Sobeys’ #2 position nationally with pro forma revenue of approximately $24 billion
• Canada Safeway has an exceptional store network totaling approximately 9 million square feet in sought-after locations of which over 60 percent is located in Vancouver, Calgary, Edmonton and Winnipeg
• $1.8 billion in owned real estate (based on an independent appraisal as at March 30, 2013)
• Aligned corporate strategy – both companies have complementary offerings, are focused on excellence in fresh food and represent a great cultural fit
• Strengthens Sobeys’ talent base
• Identified cost synergies of approximately $200 million annually within three years
• Management expects the acquisition to be immediately accretive to adjusted net earnings per share and in excess of 25 percent accretive once synergies are fully realized
• Significant free cash flow generation and rapid de-leveraging

“We are very excited by this acquisition and the future opportunities it presents,” said Marc Poulin, President and CEO of Sobeys. “This is a win-win for both companies, as well as for our customers and employees. Our employees have always been the foundation of our success and, with the addition of the great team at Canada Safeway, our customers can continue to expect a high quality offering with excellence in fresh food supported by great service. Our offering will only get stronger as we share and build upon best practices of two great businesses.”

Mr. Poulin added, “Sobeys expects to benefit from increased economies of scale. We anticipate capturing capturing annual cost synergies of approximately $200 million within three years, through integrating and modernizing distribution networks, reducing cost in procurement, administration and marketing, and leveraging Sobeys’ IT infrastructure.”

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