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Safeway Inc. Message Board

  • txthunderss txthunderss Oct 23, 2013 3:00 PM Flag

    2013 Guidance of 600-650 million free cash flow.

    Thats why PE firms are looking to buy. New management cuts costs and does their financial magic to make a boatload of money. 2 billion buyback, asset sales, activist shareholders, and nice divy provides great support. This is a no brainer strong buy.

    Sentiment: Strong Buy

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    • What kind of multiple does it take to get the $16 Billion market share that supposed $57/share buyout you longs are speculating? That kind of financing does not exist. 81 Million EBITDA and dropping is what you want to look at. At 10X EBITDA you get a value of around $3.50/share.

      I'm not saying you're wrong. There is just a few ways to skin this cat.

      Sentiment: Hold

      • 2 Replies to mlathrop3
      • $57/sh seems frothy to me. My target is $40/sh. $4 Billion net coming into the company after Canada sale closes. EBITDA may not be dropping in future quarters. Chicago stores going away so those losses will be a thing of the past. And paying off $2 Billion in debt will not increase EBITDA, but it will increase earnings. (the I in EBITDA being interest expense) EPS will be up without Chicago and with the debt reduction and the share count reduction from the increasing buyback. The equity funds are sniffing around because of the $4Billion cash coming into the company. They could swoop in, buy the company, take the cash and restructure the company in a completely different way and then bring whatever remains public again.

      • Buffet just did it at Heinz. You buy the company and fire a bunch of people and cuts costs. People are still buying the ketchup but new owners are making all the increased profits. So at Safeway you get new ownership and slash jobs, refinance/borrow at cheap rates, increase earnings and keep the profits. After a few years of that IPO for an exit.

        Sentiment: Strong Buy

 
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