Safeway visits the Friday night dump

Almost two years ago, in April 2012, there was rampant speculation that grocery chain Safeway Inc. was on the verge of being acquired. Various media outlets reported the news, in part, based on reports by three different sell-side analysts at J.P. Morgan Chase, DeutscheBanc and Bank of Montreal (BMO). At the time, the signals that the various analysts were citing just didn’t add up to us, so much so that we took the rare step of putting out our own Pro report on April 26, 2012 (subscribers only) debunking the rumor.

As it turns out, the speculation was wildly off-base and investors who bought the stock in the hopes of a big takeover premium, most likely lost money. Between April and the end of November, Safeway stock fell by nearly 20%, substantially under-performing the market.

We thought about this again as we dove into the weekly Friday Night Dump. That’s because at 4:03 pm on Friday, Safeway filed this 8-K, spelling out a shiny new executive severance plan. The plan provides two years of salary continuance for CEO Robert Edwards under various conditions and 18 months for the four executive vice presidents, which include the company’s CFO and its Chief Marketing Officer.

We’re sure it’s just coincidental that the plan was filed on the very same day that the merger speculation — private equity fund Cerberus Capital Management was reported to be the leading bidder in this Reuters story — was reaching fever pitch. Over the past week, the stock has climbed by nearly 20% on the rampant speculation that Safeway would be taken private.

We certainly don’t have an inside track, but we do know what we see in the filings and Friday’s filing clearly provides some fuel to the speculative fire. That’s because as Safeway has spelled out in prior proxies, “We currently do not provide contractual change in control or severance benefits to any executive officer.” Which raises the question: why is Safeway doing this now?

One of our underlying principles here at footnoted is that there are no accidents in SEC filings. When a company that went out of its way not to provide benefits suddenly changes its tune, it’s worth paying closer attention to.


Regular readers of the site have probably noticed that we’re providing a lot less free content these days. There’s been times when we’ve done two posts a day, but lately, we’ve been averaging about one every other week. That’s because especially during filing season, our focus is first and foremost on our subscribers. However, we continue to use twitter to post short updates and encourage you to follow us @footnoted.