06/13/2013 19:08 EDT | Updated 08/13/2013 05:12 EDT

Sobeys takes aim at big box stores with Safeway takeover

A Vancouver-based retail analyst says Sobeys' acquisition of more than 200 Safeway stores in Western Canada is an attempt to compete with the growth of big box stores.

David Ian Gray, founder of DIG 360, says the $5.8 billion deal will allow Sobeys to merge its distribution arm with Safeway's and, at the same time, provide Sobeys more stores in which to sell those goods.

- Read more about the takeover deal

"Sobeys is trying to build scale to be able to compete with Wal-Mart and Targets," he said. "It's all part of this move to bring prices down and to move product very efficiently."

Gray said he believes Sobeys will do a better job than Safeway when it comes to operating the grocery stores efficiently. Sobeys already owns the Thrifty Foods chain in B.C. and several others in eastern Canada, including FreshCo. and Foodland. It is the second-biggest grocery store chain in Canada after Loblaws.

But Ernie Skinner, who owns two small grocery stores in Victoria, says he worries the deal means he won't have any choice when it comes to purchasing his products wholesale.

"I'm concerned that we're going to end up with a food distribution system that's much like the oil industry in Canada... there is no competition," Skinner said.

The deal, announced yesterday, will be paid for in cash, and has been approved by the boards of directors of both companies. It is expected to close in the fall of 2013 — subject to approval by the federal Competition Bureau.

More than groceries

Along with 213 Safeway grocery stores — more than 60 per cent of which are in Calgary, Vancouver, Edmonton and Winnipeg — Sobeys will also acquire:

- 199 in-store pharmacies.

- 62 gas stations.

- 10 liquor stores.

- 4 primary distribution centres.

- 1 related wholesale business.

- 12 manufacturing facilities.