Latham Leads for Safeway as Hedge Fund Snags Stake
Safeway announced Tuesday its adoption of a shareholders rights plan, or “poison pill,” that will cap any stake in the grocery giant at 10 percent to ward off unwanted advances.
The move came on the heels of a disclosure by Jana Partners—a $6 billion hedge fund headed by Barry Rosenstein—in a regulatory filing that it had accumulated a 6.2 percent stake in Safeway at an aggregate purchase price of nearly $320 million.
Jana, which has a reputation for pushing for change at companies in which it invests, has urged Safeway to conduct a strategic review of its options and consider the sale of certain assets to bolster profits, according to news reports.
Latham & Watkins is serving as outside counsel to Safeway as it prepares for a possible proxy fight with Jana. Leading the Latham team are of counsel Barry Bryer, a former head of the firm’s takeover defense group before retiring from the partnership earlier this year, and corporate partner Scott Haber and associate Tiffany Campion.
Robert Gordon, who became Safeway’s general counsel in 2000 after the retirement of predecessor and former Latham partner Michael Ross, is heading up an in-house team that includes vice president of corporate law Laura Donald.
Kenneth Oder, a former labor and employment partner at Latham, has been an independent member of the board of directors at Safeway since 2008. Oder was a Latham partner from 1975 to 1992, leaving the firm in 1993 to become Safeway’s executive vice president of labor relations, human resources, and legal and public affairs.
The Pleasanton, California–based supermarket chain, which is one of North America’s largest food retailers, has been a longtime Latham client. The firm advised Safeway on its $5.5 billion sale to KKR in 1986—the company is now public after the private equity giant cashed out with a $7 billion profit in 1999—and $1.6 billion purchase of a controlling stake in The Von Companies a decade later.
This summer, Latham counseled Safeway on the $5.7 billion sale of its Canadian arm to the Empire Company’s Sobeys chain, according to our previous reports. Latham also represented Safeway earlier this year on a $230 million initial public offering for its gift card business Blackhawk Network Holdings, which yielded nearly $1.7 million in legal fees and expenses, according to securities filings. (Safeway retains a 73 percent ownership stake in Blackhawk.)
Safeway cited those transactions as evidence that it "can continue to implement its strategic plan and maximize the long-term value of the company for all shareholders."
Jana's interest in Safeway comes amid a surge in shareholder activism that has spawned a growing debate—see the ongoing tit-for-tat between poison pill inventor Martin Lipton of Wachtell, Lipton, Rosen & Katz and Harvard Law School professor Lucian Bebchuk—about whether such investments strengthen or weaken companies. Skadden, Arps, Slate, Meagher & Flom recently helped struggling retail giant J.C. Penney fend off activist investor William Ackman.