Canada’s No 2 grocer Sobeys has made a $5.8-billion deal to swallow key western rival Safeway Inc, while Sobeys reported on 27 June that sales and profits increased in its last financial year. Sobeys’ parent, Empire Co. Ltd. of Stellarton, N.S., in June unveiled a surprise agreement to take over Safeway Inc.’s profitable Canadian division. The acquisition is designed to bolster Sobeys’ presence in the critical western provinces and solidify its position as the country’s No. 2 grocery player.

Empire said its acquisition of Safeway’s Canadian estate will allow the group to drive growth by leveraging Sobeys existing asset base. Empire president and CEO Paul Sobey said: “We are energized by our June 12th announcement to acquire substantially all of the assets of Canada Safeway. This acquisition represents a highly strategic opportunity for Sobeys to leverage its existing asset base and effectively create a new platform for growth.”

The retail food business in Canada remains tough and Sobeys has also had to take on Wal-Mart, the emerging Target Corp. and other forces in its move toward. Perry Caicco, retail analyst at CIBC World Markets said in a report earlier this year that Sobeys’ business model of slashing costs and prices, while improving its store offerings and displays, “should allow it to survive the next couple of years in pretty good shape”.

Industry leader Loblaw Cos. Ltd. gets most of the attention for its seven years of reinvention under leader Galen G. Weston, but second-ranked Sobeys has been slogging away in the trenches to boost its operations and then taking a big stride by snagging the coveted Safeway Canada.

Empire Co. said Sobeys put in a “solid” performance in the year to 4 May, with same-store sales at the supermarket group up 1.3%.

Total sales increased to C$17.61bn (US$16.81bn), up 8.4%. Excluding the acquisition of 236 retail gas locations and related convenience store operations in the period, sales were up 2.9%. Net earnings, net of non-controlling interest, totaled $384.8m, compared to $339.4m in the prior year period.