Safeway plans IPO of Blackhawk gift-card business
PLEASANTON, Calif. (AP) — Safeway Inc. said Wednesday that it plans to take its gift card business, Blackhawk Network Holdings Inc., public by the first half of 2013.
The supermarket chain said that it plans to file a registration statement for the public offering of a minority stake in its Blackhawk business. The exact timing of the IPO depends on market conditions. Safeway gave no details on pricing.
Blackhawk sells gift cards at grocery stores, drugstores and other retailers. It also operates the website GiftCardMall.com.
The grocer, which operates chains such as Vons and Randalls, launched the prepaid gift card business in 2001 as a means to sell customers something beyond traditional grocery offerings. It also hoped the business could be eventually be expanded beyond its doors.
Blackhawk began by selling gift cards in Safeway stores but now sells everything from prepaid gift cards to telephone cards at retailers worldwide. Safeway says the business is now the nation's largest third-party distribution company in the in the U.S.
Analysts largely believe the offering will be well received. They have long anticipated a spinoff, sale or other means to cash in on the value of the quick-growing, independent business. However, CEO Steve Burd was clear at an investor conference this spring that he would not spin off the unit.
Safeway spokeswoman Teena Massingill said in an email that the offering is a "natural evolution to highlight value of a subsidiary that has been performing well".
J.P. Morgan analyst Ken Goldman said that the timing is peculiar given Burd's earlier stance.
He said that it may be an effort to improve value for Safeway shareholders while its core grocery business struggles with the impact of tough competition and increasing debt. But he added that it is not a favorable time for an IPO for a gift card company as competitor Green Dot Corp. reported weak results in late July.
Safeway, based in Pleasanton, Calif., reported in July that its second-quarter net income fell 16 percent as it spent more on advertising and rolled out a new loyalty program to stave off growing competition.
Traditional grocers such as Safeway are struggling to hold onto shoppers as big-box retailers and dollar store and other discounters expand their food offerings.
Investors welcomed the news of the offering, sending Safeway shares up 68 cents, or 4.3 percent, to close at $16.50. Its shares had fallen to a 52-week low of $14.73 in mid-July. They are still down 29 percent from their high for the past year of $23.16 in February.