Sobeys to sell Safeway dairy assets

Sobeys on Wednesday said it had reached an agreement with Agropur Cooperative by which Agropur will acquire Sobeys’ dairy manufacturing facilities in Western Canada and supply milk, yogurt, and ice cream to Sobeys, Safeway and IGA stores in the West under long-term supply arrangements.

The purchase price of $334 million (U.S.) million includes the sale of manufacturing facilities located in Edmonton, Alberta, and Winnipeg, Manitoba, and in Burnaby, British Columbia; licensing of the Lucerne trademarks to Agropur for milk production and distribution; long-term milk, yogurt and ice cream supply agreements that will come into effect upon transfer of the facilities to Agropur and expiry of current supply agreements; and a national supply agreement for private label cheese.

Sobeys acquired the milk production facilities as part of its 2013 takeover of Canada Safeway.

"This agreement maximizes the value for these assets while securing long-term supply agreements that create synergies for our entire Canadian business," Marc Poulin, president and CEO of Sobeys, said in a statement. "It also ensures that these facilities will continue to produce the very popular Lucerne dairy brand which will not only remain available in our Safeway banner stores, but will be expanded to our network of Sobeys and IGA stores throughout the West.”

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Sobeys, Stellarton, Nova Scotia, said it expected the transaction to be neutral to slightly accretive on a net earnings basis. Proceeds will be used for debt repayment.

Agropur is a $3.8 billion dairy cooperative based in Longueuil, Quebec. It said the acquisition represents around $400 million in annual sales.

The sale is subject to approval by the Competition Bureau.