Safeway, the California-based supermarket chain, said on Wednesday that it planned to file for an initial public offering of a minority stake in its fast-growing gift card unit, Blackhawk Network Holdings. Shares of Safeway were up 5 percent by midday.
Blackhawk is the third largest distributor of prepaid gift cards for retailers and brands, selling them at more than 70,000 locations, including drugstores, specialty shops and Internet retailers. The business began in 2001, with its cards first appearing in Safeway grocery stores.
At an investor conference earlier this year, Safeway executives disclosed that the face value of the money stored on the cards grew to $6.9 billion last year, up 25 percent from the previous year. The Blackhawk business had pre-tax income of $62 million in 2011 and adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, of $78 million.
If one applied a multiple of 12 times to last year's Ebitda, t he Blackhawk unit has an implied enterprise value of $936 million, Jonathan P. Feeney, an analyst with Janney Capital Markets, wrote in a note to clients.
Safeway said that depending on market conditions, it expected an offering to come to market in the first half of next year.
