Safeway Adopts Poison Pill After Jana Partners Takes 6% Stake

(RTTNews) - Safeway Inc.'s (SWY) shares surged more than 10 percent on Tuesday after the food and drug retailer announced that it has adopted a one-year stockholder rights plan, known as "poison pill", noting that it was aware of an accumulation of a significant amount of its common stock.

Meanwhile, hedge fund Jana Partners LLC, in a regulatory filing, noted that it has acquired an approximately 6.2 percent stake in the retailer.

In a filing with Securities and Exchange Commission or SEC, Jana Partners said it has acquired 14.95 million shares of Safeway, including options to purchase 3,530,300 shares, at an aggregate purchase price of about $318.9 million.

Jana said it has had and may continue to have discussions with Safeway management regarding a review of strategic alternatives including its operating markets and exiting subscale and lower margin geographies, among other things.

In its statement, Safeway said that its Board of Directors believes that the rights plan will help promote the fair and equal treatment of all stockholders of the company. A rights plan effectively blocks an investor from acquiring more than 10% of the shares outstanding.

Safeway noted that it has recently undertaken a number of strategic initiatives including the IPO of Blackhawk Network and the pending sale of its Canadian assets. According to the firm, the rights plan will help ensure that it can continue to implement its strategic plan and maximize its long-term value. The rights will expire on September 15, 2014.

Safeway shares closed Tuesday's trading at $30.99, up $2.95 or 10.52 percent. In the extended trading, shares lost 1.26 percent to $30.60.