On March 6, Cerberus announced the signing of a definitive agreement pursuant to which Safeway shareholders will receive $32.50 per share in cash and additional consideration with an estimated value of $3.65 per share, for a total consideration of $36.15 per share.
Now attorneys at San Diego-based Robbins Arroyo LLP are investigating whether the board of directors at Safeway is undertaking a fair process to obtain maximum value and adequately compensate Safeway shareholders.
As an initial matter, the law firm's attorney Darnell R. Donahue said the $36.15 merger consideration represents a premium to shareholders of just 6% based on Safeway's closing price on Feb. 18, the last day of trading prior to the announcement that Safeway was in discussions to sell the company.
This one day premium is significantly below the average one day premium of over 20% for comparable transactions in the last three years, lawyers at the firm said.
Further, they said, prior to the announcement of the merger, there were seven analysts with target prices higher than the $36.15 merger consideration, including analysts at Telsey Advisory Group and Wolfe Research, LLC who each set a price of $46 on Feb. 20.
In addition, on Feb. 19, Safeway released its financial results for the fourth quarter 2013, reporting increases in sales and other revenue as well as gross profit. Specifically, Safeway reported that the company's sales and other revenue reached $11.3 billion in the quarter and its gross profit increased 20 basis points to 26.52%.
In announcing the company's results, Safeway's President and CEO Robert Edwards stated, "In 2013, we generated our best volume growth since 2006, and we had our best identical-store sales growth in the last five years. At the same time, we continue to pursue strategies to enhance momentum and increase shareholder value. We look forward to continuing progress in 2014."
Donahue said that given these facts, Robbins Arroyo LLP is examining the Safeway board's decision to sell the company to Cerberus now rather than allow shareholders to continue to participate in the company's continued success and future growth prospects.
Safeway shareholders have the option to file a class action lawsuit to ensure the board of directors obtains the best possible price for shareholders and the disclosure of material information, Donahue said.
For more information, contact Donahue at (800) 350-6003, firstname.lastname@example.org or via the shareholder information form on the firm's website.