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Safeway said to be in talks with CVC Capital, Leonard Green

CVC Capital Partners Ltd. and Leonard Green & Partners LP are among the firms in talks with Safeway Inc. about buying some or all of the grocery chain as it weighs a sale, people with knowledge of the matter said.

Cerberus Capital Management LP is also discussing options with the retailer, said one of the people, who asked not to be identified because the process is private.

While the firms are looking at acquiring the entire company, they’re more interested in cherry-picking assets in certain regions, such as California, said the people. Goldman Sachs Group Inc. (NYSE: GS) is working with Safeway (NYSE: SWY) as it explores possibilities, one person said.

Safeway, the second-largest U.S. grocery-store chain, said Wednesday it’s in talks about a potential sale as it divests some assets and struggles to increase revenue. No agreement has been reached and there is no assurance a deal will be completed, the Pleasanton-based company said in a statement.

KKR & Co. (NYSE: KKR) bought Safeway in 1986 for about $4.3 billion, according to data compiled by Bloomberg. The retailer went public in 1990.

Leonard Green and CVC, which jointly own big-box wholesale chain BJ’s Wholesale Club Inc., could team up to do a deal, one of the people said. Representatives for CVC, Leonard Green, Cerberus, KKR and Goldman Sachs declined to comment. Brian Dowling, a spokesman for Safeway, didn’t respond to a phone call and e-mail seeking comment.

Simplifying operations

Safeway rose 2.1 percent to $35.32 at the close in New York. The shares have gained 8.4 percent this year, giving the company a market value of about $8.5 billion, while the Standard & Poor’s 500 Index has dropped 0.5 percent.

Safeway has been simplifying its operations and recently sold its 72 Dominick’s stores in the Chicago area after divesting its Canadian business and conducting an initial public offering of gift-card unit Blackhawk Network Holdings Inc. (Nasdaq: HAWK).

The company said Wednesday sales rose 0.2 percent to $36.1 billion last year as U.S. supermarket revenue stagnates. Researcher IBISWorld Inc. in July projected sales at U.S. grocers would increase 0.2 percent to $517.8 billion in 2013 after declining 0.4 percent in 2012.

Safeway has about 1,335 stores in the United States. Kroger Co. (NYSE: KR), based in Cincinnati, is the largest U.S. supermarket chain.

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