Activist Jana Partners Buys a Boatload of Safeway Inc. (SWY)

Barry Rosenstein’s Jana Partners has filed a schedule 13D with the SEC indicating it has upped its stake in Safeway Inc. (NYSE:SWY) significantly. According to the filing, Jana now owns 14,950,000 shares of the food and drug retailer (including options to purchase 3,530,300 shares of Common Stock), representing 6.2% of the company. The entire position was taken at an aggregate purchase price of $318.9 million. 

Safeway shares were up 9.7% on the news yesterday, and are up another 0.5% today.

Here’s what Jana had to say about Safeway Inc. (NYSE:SWY) in the filing (Item 4):

“The Reporting Person acquired the Shares because it believes the Shares are undervalued and represent an attractive investment opportunity. The Reporting Person has hadand may continue to have discussions with the Issuer’s management regarding a review of strategic alternatives including reviewing the markets in which the Issuer operates and exiting subscale and lower margin geographies, the Issuer’s capital structure including providing for a significant return of capital to shareholders, the Issuer’s corporate structure including the transferring of its stake in Blackhawk Network Holdings, Inc. to shareholders, and the Issuer’s investor communications including increasing transparency. The Reporting Person may also seek to discuss other topics including management and board composition, strategy and future plans. The Reporting Person expects to continue to have such discussions with the Issuer’s management as well as with the Issuer’s board of directors, shareholders and other parties relating to such matters, and may take other steps seeking to bring about changes to increase shareholder value as well as pursue other plans or proposals that relate to or would result in any of the matters set forth in subparagraphs (a)-(j) of Item 4 of Schedule 13D.”

In short, it looks like Jana and Rosenstein are attracted to Safeway because they think it can stimulate shareholder value. Whether this comes in the form of a management shakeup, a dividend, or a buyback remains to be seen, but we’ll continue to watch the retailer–and this hedge fund manager–very closely.

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Disclosure: none