Safeway Stock Rallies on Buyout Rumors; Debt Concerns Rise

Safeway (NYSE: SWY) stock is rallying after rumors of a buyout of the nation's second largest retail firm continued to swirl.

Shares rose 8.7 percent to $35.76 in late afternoon trading Wednesday, extending gains of 81.9% as of Tuesday's close.

Cerberus Capital Management and other private equity firms are said to be considering a buyout of Safeway, which has a market value of around $8.7 billion. The grocery chain recently came under shareholder pressure from activist investor Jana Partners, which said Safeway should review strategic alternatives.

Safeway and Cerberus still have not commented on the buyout rumors. Cerberus was behind the $3.3 billion deal to purchase a portfolio of Supervalu (NYSE: SVU) grocery chains, including Albertsons.

Despite a rise in Safeway's stock price on Tuesday and Wednesday, investors are concerned about the buyout. The cost of insuring Safeway's debt against default rose sharply on Wednesday. Safeway's five-year credit default swaps (CDS) increased as much as 54.5 basis points to 256bp, a six-month wide.

For more, see:
This Reuters article
This Fox Business article

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