Safeway, Inc.’s Leveraged Buyout (A)

After years of deteriorating financial performance and erosion of market positions, Safeway, Inc., the largest public supermarket chain in the United States, has been the subject of a hostile takeover bid. Management decided to take the company private through a $ 4.3 billion leveraged buyout sponsored by Kohlberg Kravis and Roberts. This case begins with the controversy surrounding Safeway’s sale of the Dallas division as a result of the LBO and traces the events that led to the LBO. Ongoing discussion of management challenges in restructuring the company, including the renegotiation of non-competitive employment contracts and strong pressure in the capital markets (from hostile takeover bids) to relinquish control of the company.

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