fareastwarriors Posted October 16, 2013 Share Posted October 16, 2013 BMO Capital initiates coverage on SAFEWAY (NYSE: SWY) with a Outperform. PT $38.00. Analyst Kelly Bania said, "Despite our ongoing concerns about the secular outlook for the broader traditional supermarket's operating margin trajectory, which have been under pressure for the last several years, we believe new CEO Robert Edward's significant change in the company's view toward improving shareholder value through initiatives such as divestitures, a new company mandate to focus on growing sales and operating income dollars, all the way to changes in the company’s culture, are significant positive developments. Safeway is continuing to evaluate strategic alternatives that could further enhance shareholder value (including additional divestitures) and while difficult to forecast the potential financial impact, we believe the significant change in company's priority to enhance shareholder value deserves recognition in its valuation." http://www.streetinsider.com/Analyst+Comments/BMO+Capital+Starts+SAFEWAY+(SWY)+at+Outperform/8780696.html Link to comment Share on other sites More sharing options...
FCharlie Posted October 16, 2013 Author Share Posted October 16, 2013 BMO Capital initiates coverage on SAFEWAY (NYSE: SWY) with a Outperform. PT $38.00. Analyst Kelly Bania said, "Despite our ongoing concerns about the secular outlook for the broader traditional supermarket's operating margin trajectory, which have been under pressure for the last several years, we believe new CEO Robert Edward's significant change in the company's view toward improving shareholder value through initiatives such as divestitures, a new company mandate to focus on growing sales and operating income dollars, all the way to changes in the company’s culture, are significant positive developments. Safeway is continuing to evaluate strategic alternatives that could further enhance shareholder value (including additional divestitures) and while difficult to forecast the potential financial impact, we believe the significant change in company's priority to enhance shareholder value deserves recognition in its valuation." http://www.streetinsider.com/Analyst+Comments/BMO+Capital+Starts+SAFEWAY+(SWY)+at+Outperform/8780696.html Amazing that this analyst feels there's been a "significant change in the company's priority to enhance shareholder value" Historical shares outstanding 2008 440 million 2009 428 million 2010 388 million 2011 368 million 2012 268 million 2013 241 million Dividend has grown 20% annually for eight years for a cumulative increase of 300% Blackhawk was created from nothing and Safeway grew it and IPO'd a minority interest at a $1+ Billion market value. PDC was created from nothing and now owns 35 shopping centers, collecting rent from tenants. Owned real estate has exploded even as total debt has declined. All of the buybacks, dividends, shopping centers, subsidiaries were funded with free cash flow. Real estate per share should be approaching $50 per share next year. Today they are selling the Canadian division at a great price, they are exiting Chicago, which is an unprofitable market, and they will further repurchase 35% of their shares, should increase the dividend again in the spring. Safeway still owns a majority of Blackhawk and is still growing PDC. Now tell me what has significantly changed in Safeway's approach to shareholder value? Where was this analyst when SWY traded for $15/share? Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 16, 2013 Share Posted October 16, 2013 FCharlie, thank you for explaining your thesis throughout this thread and helping us understand how to think about this company. Do you think Safeway is fairly valued now in the mid-30s? Link to comment Share on other sites More sharing options...
FCharlie Posted October 17, 2013 Author Share Posted October 17, 2013 Good question. Obviously it's closer to fair value than it was. I'm sitting and waiting for the dust to settle with regards to the Canadian transaction and the huge share repurchases that are coming. Once everything is settled I think SWY will still be a double digit free cash flow yield, ($600 million FCF on 155 million shares X $33/share = 11.7% FCF yield)... They will still own nearly 75% of HAWK. They will still have about $7.5 billion of real estate at cost ($48.00 per share). Debt will be materially lower and falling. So, yes... I think SWY is still a good idea to own here. I haven't been adding to my position but it was so enormous to begin with there's been no reason to. If I inherited a brokerage acct. with 100% cash and I couldn't withdraw it, SWY would be one of the first stocks I'd buy, along with SHLD and BAC, ( my top three holdings today). Link to comment Share on other sites More sharing options...
OracleofCarolina Posted October 23, 2013 Share Posted October 23, 2013 http://finance.yahoo.com/news/exclusive-cerberus-others-explore-deal-225325908.html Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 23, 2013 Share Posted October 23, 2013 hmmm this is getting very interesting. i wonder if they will do a buyout Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 23, 2013 Share Posted October 23, 2013 http://phx.corporate-ir.net/phoenix.zhtml?c=64607&p=irol-newsArticle&ID=1865929&highlight= Safeway Inc. (NYSE: SWY) announced that its Board of Directors increased the authorized level of the company's stock repurchase program by $2.0 billion. Through the end of the third quarter of 2013, Safeway had approximately $0.8 billion remaining under its previously authorized stock repurchase program. http://phx.corporate-ir.net/phoenix.zhtml?c=64607&p=irol-newsArticle&ID=1867008&highlight= Safeway Inc. (NYSE: SWY) announced today that Canada's Competition Bureau has entered into a consent agreement with Sobeys Inc. allowing the parties to proceed with their transaction whereby Sobeys will acquire the net assets of Canada Safeway. The parties now expect to close the transaction in early November 2013. (Logo: http://photos.prnewswire.com/prnh/20130625/SF38175LOGO) As part of the consent agreement, Sobeys has agreed to divest 23 stores – 13 Canada Safeway stores and 10 Sobeys stores. Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 23, 2013 Share Posted October 23, 2013 http://www.insidebayarea.com/business/ci_24373275/safeway-may-be-target-buyout-bid Safeway shares closed at $35.58 Wednesday. But Short, of Deutsche Bank, said a buyout offer of $56 a share "would be very reasonable." Scott Mushkin of Wolfe Research agreed that Cerberus would "pay a lot more than the current price" of shares. Link to comment Share on other sites More sharing options...
FCharlie Posted October 25, 2013 Author Share Posted October 25, 2013 Looks like the Safeway Executive Vice Presidents and Senior Vice Presidents aren't afraid to sell here.... I wonder if they know something about the boards willingness to sell the company?? http://www.sec.gov/Archives/edgar/data/86144/000118143113055061/xslF345X03/rrd393406.xml EVP 50,000 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055058/xslF345X03/rrd393402.xml SVP 16,642 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055057/xslF345X03/rrd393425.xml SVP 19,000 shares Option Exercise & Sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055056/xslF345X03/rrd393435.xml SVP 2,824 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055055/xslF345X03/rrd393439.xml EVP 190,000 shares Option Exercise & Sale Link to comment Share on other sites More sharing options...
fareastwarriors Posted October 29, 2013 Share Posted October 29, 2013 http://www.insidebayarea.com/news/ci_24405445/safeway-executives-sell-stock-after-rumors-buyout-offer Safeway executives sell stock after rumors of buyout offer Link to comment Share on other sites More sharing options...
nnayyar Posted November 7, 2013 Share Posted November 7, 2013 Hi FCharlie, Do you think there's anything to read into these insider sales? Just started to look into this and seems very very interesting. Thanks! Looks like the Safeway Executive Vice Presidents and Senior Vice Presidents aren't afraid to sell here.... I wonder if they know something about the boards willingness to sell the company?? http://www.sec.gov/Archives/edgar/data/86144/000118143113055061/xslF345X03/rrd393406.xml EVP 50,000 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055058/xslF345X03/rrd393402.xml SVP 16,642 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055057/xslF345X03/rrd393425.xml SVP 19,000 shares Option Exercise & Sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055056/xslF345X03/rrd393435.xml SVP 2,824 shares open market sale http://www.sec.gov/Archives/edgar/data/86144/000118143113055055/xslF345X03/rrd393439.xml EVP 190,000 shares Option Exercise & Sale Link to comment Share on other sites More sharing options...
FCharlie Posted November 7, 2013 Author Share Posted November 7, 2013 Hi FCharlie, Do you think there's anything to read into these insider sales? Just started to look into this and seems very very interesting. Thanks! Yes. I think it's a sign that upper management believes the board will not sell the company. People exercise options all the time, but to see hundreds of thousands of shares sold open market in addition to option exercises and sales to me is a strong sign that there isn't going to be a deal to sell. Since I posted that there have been a further 111,000 shares reported sold by EVP's. Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 8, 2013 Share Posted November 8, 2013 http://www.bloomberg.com/article/2013-11-06/azoJRod1SOwU.html Fitch Expects Safeway's Operations Will Continue to be Pressured Following Canada Sale Link to comment Share on other sites More sharing options...
fareastwarriors Posted November 18, 2013 Share Posted November 18, 2013 http://www.businessweek.com/articles/2013-11-14/2014-outlook-supermarkets-offer-personalized-pricing#r=nav-fs Supermarkets Offer Personalized Pricing Link to comment Share on other sites More sharing options...
OracleofCarolina Posted February 19, 2014 Share Posted February 19, 2014 http://www.sec.gov/Archives/edgar/data/86144/000008614414000004/earningsreleaseq42013.htm impending sale, blackhawk spinoff, Casa Ley sale Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 19, 2014 Share Posted February 19, 2014 http://www.sec.gov/Archives/edgar/data/86144/000008614414000004/earningsreleaseq42013.htm impending sale, blackhawk spinoff, Casa Ley sale Man... I sold out of my position at high 30s and was hoping to re-enter under 30. Never pulled the trigger. Link to comment Share on other sites More sharing options...
fareastwarriors Posted February 20, 2014 Share Posted February 20, 2014 Safeway Said in Talks With Firms Including CVC, Leonard Green http://www.bloomberg.com/news/2014-02-20/safeway-said-in-talks-with-firms-including-cvc-leonard-green.html Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 3, 2014 Share Posted March 3, 2014 Kroger Said to Contact Safeway About Buying Some Assets http://www.bloomberg.com/news/2014-03-03/kroger-said-to-contact-safeway-about-buying-some-grocery-assets.html Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 5, 2014 Share Posted March 5, 2014 Cerberus Seeks to Sew Up $9 Billion-Plus Deal for Safeway Private-Equity Firm Offering About $40 a Share for Safeway http://online.wsj.com/news/articles/SB10001424052702304732804579421310728895156?mod=wsj_streaming_stream&mg=reno64-wsj man >< sold it way too early. Link to comment Share on other sites More sharing options...
Rabbitisrich Posted March 5, 2014 Share Posted March 5, 2014 Wow, congratulations FCharlie. What a great ride, even in a bull market. Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 6, 2014 Share Posted March 6, 2014 Cerberus Agrees to Buy Safeway for $9 Billion Private-Equity Firm Purchase Follows Earlier Deal for Grocery-Store Chain Albertsons http://online.wsj.com/news/articles/SB10001424052702304554004579423490646705268?mod=WSJ_hp_LEFTTopStories&mg=reno64-wsj Link to comment Share on other sites More sharing options...
fareastwarriors Posted March 7, 2014 Share Posted March 7, 2014 merger slides.Merger_Slides_03-06-14_FINALFINAL.pdf Link to comment Share on other sites More sharing options...
Sportgamma Posted March 7, 2014 Share Posted March 7, 2014 I´m having mixed feelings about this. The price ex HAWK, PDC and Casa is 32.5 per share, or roughly $7.4B, right? At yearend they had $4.6B of cash on the BS. So, they are effectively paying $2.8B for FCF of $600M (x4.6). Link to comment Share on other sites More sharing options...
mcliu Posted March 7, 2014 Share Posted March 7, 2014 I think FCF post-sale of Safeway Canada is something like $450 million. There's almost $5.5 billion in debt and post-retirement obligations. I think it's something like 7.5x EV/EBITDA or 15x EV/FCF. Pretty fair to over valued in my opinion, but they're probably hoping to extract a bunch of costs and synergies. Leveraged loan financing is probably very cheap these days so they can pay up. Link to comment Share on other sites More sharing options...
rmitz Posted March 7, 2014 Share Posted March 7, 2014 I'm trying to figure out how the HAWK distribution will be taxed, but it's not obvious based on the slides. Anyone know, or is the proper detail on that still forthcoming? Link to comment Share on other sites More sharing options...
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