Safeway Finally Plans To Distribute Remaining Blackhawk Stake

The dance is finally over and Safeway (SWY) has found its suitor. After a lot of speculation, the grocer agreed to be acquired by Cerberus owned Albertson’s for ~$9b. While that would normally put the company in the hands of merger arbitrage players, the company still has some unfinished spinoff business. Back in 2012, the company announced plans to IPO a portion of its holdings in gift card leader Blackhawk Networks (HAWK). The offering took place last April and Safeway issued Blackhawk Class A shares, representing about ~19% of Blackhawk’s total shares. Safeway hung onto most of Blackhawk’s Class B shares, which have more voting power than the A shares (10 votes vs. 1 vote), and talked about possibly pursuing a spinoff sometime in the future.

The spinoff is finally here and Safeway announced that it would distribute 37,838,709 Class B Blackhawk shares on April 14th to shareholders of record on April 4th. The Class B shares do not currently trade on the open market, but are expected to be listed under the ticker ‘HAWKB’ post transaction. Safeway shareholders should get 0.164308 of HAWKB shares for every SWY share currently owned, although the final distribution ratio will be calculated on the date of record. It is worth noting that this transaction will be treated as a taxable stock dividend so please consult your tax advisers (certainly not us) for the proper treatment.

Blackhawk really hasn’t done much since its initial IPO pop last year, but it is certainly faring better than the last spinoff sporting the ‘HAWK’ ticker. It’s worth watching as this distribution could very well create some opportunities due to the onslaught of a lot of new shares with better voting rights. There might be some HAWK/HAWKB mispricings that open up, especially as many current ‘SWY’ shareholders might not be so interested in Blackhawk.

Disclosure: Author holds no position in any stock mentioned.