Safeway, Inc.'s Leveraged Buyout (A)

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Case

Reference no. 9-294-139

Subject category: Finance, Accounting and Control

Authors: Karen Hopper Wruck (Harvard Business School); Steve-Anna Stephens (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1994

Version: 1 December 1997

Length: 22 pages

Data source: Field research

Topics: Control systems; Management communication; Public relations; Restructuring; Labor unions; Leveraged buyouts

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Abstract

After years of deteriorating financial performance and eroding market position, Safeway, Inc., the largest public grocery store chain in the United States, found itself the target of a hostile takeover offer. Management decided to take the company private in a $4.3 billion leveraged buyout sponsored by Kohlberg Kravis and Roberts. This case begins with the controversy surrounding Safeway's sale of its Dallas division as a result of the LBO and retraces the events leading up to the LBO. Continues with a discussion of the challenges facing management in restructuring the company--including the renegotiation of uncompetitive labor contracts and the intense pressure from the capital markets (through hostile takeover offers) to relinquish control of the company.

Location:

Texas

Industry:

Grocery

Size:

USD15.2 billion revenues, 150,000 employees

Other setting(s):

1981-1987