Safeway announces settlement of certain actions in connection with proposed merger

PLEASANTON, Calif. — Safeway has announced its entry into a memorandum of understanding to settle the consolidated class action pending in the Court of Chancery of the State of Delaware filed on behalf of alleged Safeway stockholders against Safeway in connection with Safeway's proposed merger with an affiliate of AB Acquisition LLC.

The memorandum of understanding provides for, among other things, (i) an amendment to the definitive merger agreement to adjust certain provisions of the Casa Ley contingent value rights agreement and the PDC contingent value rights agreement, each of which were previously attached as exhibits to the definitive merger agreement, (ii) an agreement by Safeway to terminate Safeway's stockholder rights plan, commonly referred to as a "poison pill," effective June 19, and (iii) certain changes to the proxy statement filed in connection with the proposed merger, which changes will be captured in the definitive proxy statement that Safeway intends to file with the U.S. Securities and Exchange Commission.

While Safeway has entered into the memorandum of understanding and an amendment to the definitive merger agreement and has accelerated the expiration date of the stockholder rights plan to June 19, the settlement will be subject to the approval of the Delaware Chancery Court. Safeway and the board of directors of Safeway believe the claims are entirely without merit, and in the event the settlement does not resolve them, intend to defend these actions.

The changes to the terms of the PDC CVR Agreement provide that, among other things, the holders of the contingent value rights under the PDC CVR Agreement would, instead of not receiving any value for any assets of Safeway's shopping center portfolio that remain unsold at the end of the two year sale deadline period under the PDC CVR Agreement, be entitled to the fair market value of the unsold assets (net of certain expenses, fees and taxes).

The changes to the terms of the Casa Ley CVR Agreement, among other things, shorten the sale deadline period from four years to three years. In the event any of the equity interests of Casa Ley, S.A. de C.V., a Mexico-based food and general merchandise retailer, owned by Safeway remain unsold as of the sale deadline period, the determination of the fair market value that the holders of the contingent value rights under the Casa Ley CVR Agreement would be entitled to at the end of the sale deadline period would exclude any minority, liquidity or similar discount regarding such equity interests.

Originally scheduled to expire on Sept. 15, Safeway's board has amended the rights plan to accelerate the expiration date to June 19, effectively terminating the plan and the rights issued under the plan as of that date. Accordingly, upon termination, Safeway will voluntarily delist the rights from The New York Stock Exchange. Safeway plans to file an application on Form 25 to notify the SEC of the withdrawal of the rights from listing on the NYSE, and expects the withdrawal to be effective on July 3. Following the withdrawal, the company will continue to file the same periodic reports and other information it currently files with the SEC, but the rights will no longer be listed or registered on an exchange or other quotation medium.

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