Private equity firm Cerberus Capital Management is reported to have sealed a $9 billion deal to buy Safeway. Under the long-rumored deal, Cerberus is offering $40 a share and plans to pair Safeway stores with the Albertsons chain it already owns.  Cerberus acquired Albertsons, its affiliate chains, and a stake in Supervalue for $3.3 billion last year. This deal is the latest in a series of acquisitions and buyouts that is reshaping an increasing competitive industry, squeezed by rising costs, traditional rivals, discounters, warehouse clubs, and upscale chains such as Whole Foods.

Safeway, based in Pleasanton, California, operates more than 1,400 stores in the United States and Mexico, and has 21 stores in Hawaii.  If the deal goes through, Safeway CEO Robert Edwards will become CEO of the new firm, while Albertsons CEO will become executive chairman.  “There is a clear and compelling rationale for this merger,” Edwards said.  “This merger will improve our competitive position,” he said, saying synergies will lead to operational savings and lower consumer prices.

Safeway has three weeks to possibly accept other bids.  Kroger has expressed interest in acquiring some of Safeway’s  stores.  Cincinatti-based Kroger has the largest market share of any of the supermarket chains, so there are antitrust risks to consider that might complicate a possible Kroger bid. In addition, Edwards has said any other offers would have to be for the entire chain and another bidder would have to pay Cerberus a termination fee of up to $250 million.