Thursday night’s announcement that Cerberus Capital Management will acquire Safeway Inc. (NYSE: SWY) for $40 a share in cash and stock may offer be the last gasp for supermarket chains. Big-box stores like Wal-Mart Stores Inc. (NYSE: WMT), Target Corp. (NYSE: TGT) and Costco Wholesale Corp. (NASDAQ: COST) have been cutting into supermarket sales for years, and now the discounters are starting to enter the fray as well. Going big may be the last chance to survive.

Cerberus will merge Safeway with the Albertson’s stores it acquired from Supervalu Inc. (NYSE: SVU) last year for about $3.3 billion. Combined, Albertson’s and Safeway own about 2,400 stores, putting the merged firm solidly into second-place in the supermarket business behind leader Kroger Co. (NYSE: KR), which owns more than 2,600 supermarkets.

There had been speculation that Kroger might try to buy Safeway out from under Cerberus, but there was no last-minute deal. Safeway does have a 21-day “go-shop” period during which it may seek other offers. A termination fee of $150 million would be due if a competing bid is accepted from a buyer who made a qualified offer during the go-shop period. A $250 million termination fee would be paid if the offer came after the go-shop period closed.

The offer from Cerberus includes a cash payment of $32.50 per share of Safeway stock and approximately $3.65 per share from the sale of certain Safeway assets. Safeway will proceed with its current plan to distribute 37.8 million shares of stock it owns in Blackhawk Network Holdings Inc. (NASDAQ: HAWK) to Safeway stockholders, adding approximately $3.95 per share to the total value of the proposed acquisition.

Kroger has been a serial acquirer for some time now and may still put together a counteroffer for Safeway. But the Cincinnati-based supermarket only recently closed its acquisition North Carolina’s Harris Teeter chain for $2.46 billion. The attractiveness of Safeway to Kroger comes from its position in the western United States, where Kroger has a much lower presence. Albertson’s, like Safeway, has a major presence in the West and the combined stores would be much harder to displace later.

Trouble is, Kroger financed its purchase of Harris Teeter entirely with debt and currently carries more than $6 billion in long-term debt. Debt financing may be too costly for an amount approaching $10 billion.

Safeway shares were down about 3% in premarket action Friday morning, at $38.30 in a 52-week range of $22.26 to $40.25. The high was set Thursday.

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