PLEASANTON, Calif. — Recent events, which have driven Wall Street analysts to speculate that Safeway is a buyout target, are not interrelated, Safeway chairman and CEO Steve Burd assured analysts Thursday morning during the grocer's first-quarter conference call.
Analysts pointed to the recent promotion of Robert Edwards to president of the company, an uptick in Safeway's stock buyback activity, the releasing of sales, earning details for Safeway's Blackhawk Network (a gift card distribution network) and the implementation of a "double-trigger" option, where top executives would be required to stay with the company through a buyout to qualify for fully vested payouts — suggesting that each instance were like bread crumbs all leading to the only logical conclusion that Safeway is gearing for a corporate buyout.
"Everything that you described — even though you pieced them together and tried to do some sort of connection of dots — is happening [as part of a] normal course," Burd said.
During first quarter 2012, Safeway purchased 46 million shares of its common stock at an average cost of $21.70 per share and a total cost of $1 billion (including commissions). "We really believe in our ability to grow top-line sales," Burd said. "It just made so much sense to get aggressive on that stock buyback."
Regarding the double-trigger mechanism, Burd said, "no one should interpret that we did that because we expect a change in control. It's really just a migration toward increasing better governance conditions."
Burd suggested Edwards' promotion to president could be interpreted as a sound succession strategy. "Let's also consider the fact that I'm 62 [years old] and while I'm not planning to go anywhere soon, it does make sense to create some logical succession opportunities," Burd said.
And Burd said shareholders have been requesting details on Blackhawk operations for years. "One way to give people some insight into its independent value was to provide a lot more information so we elected for the first time to show the EBITDA performance of Blackhawk. As you know, it's a great story," he said.
"None of this is preparation for some other event. We think that all of this is pretty natural behavior," Burd concluded.
Safeway's identical-store sales