Safeway 1998 Annual Report Download - page 15

Company in Review
Safeway Inc. (“Safeway” or the “Company”) is one of the
largest food and drug chains in North America, with 1,497
stores at year-end 1998.
The Company’s U.S. retail operations are located princi-
pally in nort h e rn California, southern California, Ore g o n ,
Washington, Colorado, Arizona, the Chicago metro p o l i t a n
a rea, and the Mid-Atlantic region. The Company’s Canadian
retail operations are located principally in British Columbia,
A l b e r ta and Manitoba/Saskatchewan. In support of its re t a i l
operations, the Company has an extensive network of distrib-
ution, manufacturing and food processing facilities.
In addition, Safeway has a 49% ownership interest in Casa
L e y, S.A. de C.V. (“Casa Ley”) which operates 77 food and
general merchandise stores in western Mexico.
Acquisition of Dominick’s Supermarkets, Inc. (“ Dominick’s ” ) I n
November 1998, Safeway completed its acquisition of all
of the outstanding shares of Dominick’s for $49 cash per share ,
or a total of approximately $1.2 billion (the “Dominick’s
Acquisition”). Dominick’s is the second largest supermarket
operator in the Chicago metropolitan area with 114 stores,
two distribution facilities and a dairy processing plant. The
D o m i n i c k ’s Acquisition is accounted for as a purchase. Safeway
funded the Dominick’s Acquisition, including the repayment
of approximately $560 million of debt and lease obligations,
with a combination of bank borrowings and commercial paper.
Dominick’s sales for calendar year 1998 were $2.4 billion.
Acquisition of Carr-Gottstein Foods Co. (“ Carrs” ) In August 1998,
Safeway and Carrs signed a definitive merger agreement in
which Safeway will acquire all of the outstanding shares of
C a rrs for $12.50 cash per share, or a total of approximately
$110 million. In addition, Carrs has approximately $220 milliono f
debt. The acquisition will be accounted for as a purchase and will
be funded initially through the issuance of commercial paper.
C a rrs is Alaska’s largest food and drug re t a i l e r, operating
49 stores as well as the state’s largest food warehouse and
distribution operation, and largest freight company. Carr s ’
sales for calendar year 1998 were $602 million.
The acquisition of Carrs is subject to a number of condi-
tions, including the approval of the holders of a majority of
C a rrs’ outstanding shares, court approval of a consent decre e
with the state of Alaska requiring the sale of six Safeway
s t o r es and one Carrs store, and other customary closing condi-
tions. Carrs expects to schedule a shareholder meeting to vote
on the transaction in April 1999. Assuming satisfaction of all
conditions, Safeway and Carrs expect to close the transaction
s h o rtly after receiving shareholder approval and final court
a p p roval of the consent decree.
Stores Safeway operates stores ranging in size from appro x i-
mately 5,900 square feet to over 90,000 square feet. The
Company determines the size of a new store based on a number
of considerations, including the needs of the community the
s t o r e serves, the location and site plan, and the estimated
re t u rn on capital invested. Safeway’s primary new store pro t o-
type is 55,000 square feet and is designed to accommodate
changing consumer needs and to achieve certain operating
efficiencies. Most stores offer a wide selection of both food and
general merchandise and feature a variety of specialty depart-
ments such as bakery, delicatessen, floral and pharm a c y. In
most of Safeway’s larger stores, specialty departments are
showcased in each corner and along the perimeter walls of the
s t o r e to create a pleasant shopping atmosphere.
Safeway continues to operate a number of smaller store s
which also offer an extensive selection of food and general
m e rchandise, and generally include one or more specialty
d e p a rtments. These stores remain an important part of the
Company’s store network in smaller communities and certain
other locations where larger stores may not be feasible because
of space limitations and/or community needs or restrictions.