Sobeys-Safeway deal approved by Canada's Competition Bureau


By Euan Rocha

TORONTO, Oct 22 (Reuters) - Empire Co Ltd, theoperator of Canadian grocery chain Sobeys, said on Tuesday thatCanada's competition watchdog approved its acquisition ofsubstantially all of Safeway Inc's assets in Canada.

The deal cements Empire's position as Canada's No. 2 grocerbehind Loblaw Companies Ltd at a time when competitionfrom U.S. retailers Wal-Mart Stores and Target is heating up.

Empire announced in June that it was acquiring Safeway Inc's assets in Canada for $5.7 billion, a move that willnearly double its reach in the country's western provinces.

To win approval from the Competition Bureau, Empire said ithas agreed to divest 23 stores in the provinces of BritishColumbia, Alberta, Saskatchewan and Manitoba.

In addition to 200 grocery stores, Empire is acquiring about200 in-store pharmacies, along with some liquor stores, fuelstations and distribution centers. The deal is now expected toclose some time next month.

Empire, which has been in the food business for over acentury, already owns some 1,500 stores in 10 provinces acrossCanada with retail banners that include Sobeys, IGA, Foodland,FreshCo, Price Chopper and Thrifty Foods.

The assets that are being sold include 13 Safeway stores and10 stores that operate under different banners owned by Empire.

The Competition Bureau, in a separate statement, said itconcluded that the asset sales were required as the deal wouldotherwise have led to a substantial lessening of competition inthe sale of a full-line of grocery products in a number of localmarkets in Western Canada.

The bureau, an independent law enforcement agency set up toensure fair competition in Canada, said it believes Empire'sagreement to divest 23 retail stores resolves these concerns.

The agency is currently reviewing another major deal in theCanadian retail sector - Loblaw's C$12.4 billion ($12.1billion)acquisition of Canada's biggest pharmacy chain, ShoppersDrug Mart Corp.

Competition law experts believe that the Shoppers deal,which was announced in July, is also likely to require someasset sales in order to win the bureau's approval.

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