1980s: Takeover and Sell-offs
Following a hostile takeover bid from corporate raiders Herbert and Robert Haft, the chain was acquired by Kohlberg Kravis Roberts (KKR) acting as a white knight in 1986. With the assistance of KKR, the company was taken private and assumed tremendous debt. To pay off this debt, the company began selling off a large number of its operating divisions.
| Year | Division sold | # of stores | Sale price | Buyer | Outcome |
|---|---|---|---|---|---|
| 1983 | Omaha/Sioux Falls | 64 stores | n/a | Multiple buyers including Hy-Vee & Fareway | Stores continue to operate as Hy-Vee (Omaha/Lincoln/Sioux Falls) and Fareway (Sioux City, IA) |
| 1985 | Southern Ontario | 22 stores | n/a | Oshawa Group | Oshawa acquired by Sobeys in 1998 |
| 1985 | West Germany | 36 stores | n/a | Meierei C Bolle | Stores now part of Edeka |
| 1987 | Dallas | 141 stores | n/a | Unable to sell whole division | Sold in pieces to Kroger, Brookshire's, Tom Thumb Food & Pharmacy (which is now owned by Safeway), Minyard Food Stores and Furr's; some stores shuttered |
| 1987 | Salt Lake City | 60 stores | $75m | Borman's (Detroit) | Borman's sells stores in pieces at under book value in 1988 to Flemings (supermarkets) & Albertsons; Borman's acquired by A&P late 1988 |
| 1987 | El Paso | 59 stores | $140m | Furr's Supermarkets (see Roy Furr) | Firm hits financial difficulties; MBO of some stores; other sold; bankruptcy in 2001 |
| 1987 | Oklahoma | 106 stores | n/a | MBO by management and Clayton & Dubilier forming Homeland (supermarket) | Firm listed then goes into bankruptcy in 1996. Later it was bought by and became a subsidiary of Associated Wholesale Grocers. |
| 1987 | Safeway UK | 121 stores | US$1b | Argyll Foods | Stores continued to trade under Safeway name until 2005, when they were acquired by Morrisons |
| 1988 | Kansas City | 66 stores | n/a | Morgan Lewis Githens & Ahn/W S Acquisition Corp. | Renamed Food Barn; bankruptcy 1994; stores sold to Associated Wholesale Grocers, which either closed or divested them to their members. |
| 1988 | Little Rock | 51 stores | n/a | Acadia Partners | Renamed Harvest Foods; bankruptcy in 1995; stores sold off; some now part of Associated Wholesale Grocers after the demise of Affiliated Foods Southwest |
| 1988 | Houston | 99 stores | $174.6m | MBO with Duncan Cook and Co. and the Sterling Group | Renamed AppleTree; bankruptcy 1992; stores sold to competitors |
| 1987 | Safeway Australia | 135 stores | $124m | Woolworths Limited Australia | Some stores continue to trade under Safeway name. |
| 1988 | Southern California | 172 stores | $408m | Vons | Safeway takes 30% share in Vons; later acquires 100% |
The divested domestic divisions of Safeway proved to be poisoned chalices for almost all those who acquired them. Essentially every purchasing entity hit financial troubles and either went bankrupt or was later acquired. (Hy-Vee and Fareway are the exceptions with the locations they acquired, having made them work)
The international stores were more successful for their acquirers. UK stores, Safeway plc, were sold to Argyll Foods, which itself was ultimately absorbed by Morrisons in 2004. Safeway Australia was sold to the Australian-based Woolworths Limited in 1985.
In Southern California, Safeway sold its stores to Vons in exchange for a 30% interest in the company, pulling completely out of established markets like Los Angeles and San Diego, and diminishing operations in Fresno, Modesto, Stockton, and Sacramento. Save Mart Supermarkets purchased the few remaining Fresno Safeway stores in 1996.
Safeway's national presence was now reduced to several western states and Northern California, plus the Washington, D.C. area. Altogether, nearly half the 2,200 stores in the chain were sold.
Canada Safeway dominated the grocery store landscape in Western Canada in the 1970s and 1980s. For example, the company controlled 80 percent of the grocery market in Alberta in the 1970s. The government even accused Safeway of having a monopoly on the grocery store business, causing unnecessarily high food prices. A judicial inquiry restricted the number of stores Safeway could open, and forced the company to close or sell off some locations to competitors like IGA. Incidentally, while some IGA stores housed in old Safeways have operated successfully for decades, others ceased operation in recent years.
In October 1986, the Canadian Press reported Safeway Canada took an $8 million hit by closing a prime store at West Edmonton Mall, which was the world's largest shopping centre at that time. It was the fifth store Safeway had closed in west Edmonton. Among those former stores, one included the location at the former Centennial Village Mall, now Mayfield Common (the building sat vacant for years, before briefly housing Edmonton's first, but temporary Save-On-Foods in the early 1990s, as a much larger, permanent Save-On-Foods was being built up the parking lot; another former Safeway location in west Edmonton now houses a Rexall Pharmacy.
Safeway also opened other grocery stores under the Food Barn and Food for Less names in Alberta; and the Safeway Superstore name in British Columbia. Food Barn was similar to Safeway in terms of selection and prices, but the store itself resembled a warehouse the size of an average Safeway store. In the mid-1980s, Food for Less was launched in the Alberta cities of Edmonton and Calgary, as a big-box, discount food store chain meant to compete with Loblaws's Real Canadian Superstore, which had expanded to western Canada. Most Food for Less and Real Canadian Superstore locations were constructed within blocks of each other. Upon the Real Canadian Superstore's opening, Loblaws produced television commercials with an aggressive tone, taking direct aim at Safeway's higher prices. One ad featured a man holding a rolled up Safeway newspaper flyer, while promising viewers they would find lower prices at the Real Canadian Superstore. While prices at Food for Less were meant to compete with the Real Canadian Superstore's, and be lower than that of Safeway's, this wasn't always the case.
In late 1987, Safeway acquired the 26 Woodward's Food Floors, which operated in the western Canadian provinces of British Columbia (16 stores) and Alberta (10). These stores were later rebranded as Woodward's World of Food.
Safeway would close Food Barn or rebrand stores as Safeway before the decade was over.
The company was taken public again in 1990.
Read more about this topic: Safeway Inc., History
Famous quotes containing the word takeover:
“A poet is a combination of an instrument and a human being in one person, with the former gradually taking over the latter. The sensation of this takeover is responsible for timbre; the realization of it, for destiny.”
—Joseph Brodsky (b. 1940)