Safeway plans IPO for its Blackhawk Network gift card distribution division


PLEASANTON, Calif. — Safeway on Wednesday announced that it plans to file a registration statement in the United States for a potential initial public offering of a minority ownership stake in Blackhawk Network Holdings, a leading prepaid payments network.

Blackhawk Network has strong revenue growth — 33% in first quarter 2011, noted Safeway executive chairman and CEO Steven Burd during the grocer's first-quarter conference call in April. "Blackhawk actually has a lower gross margin rate than Safeway," he told analysts. "Now obviously, Blackhawk is growing at a much faster pace than Safeway. And so, that lower gross margin rate, in combination with its fast growth rate, has an effect on gross margin, which in this quarter, lowered [Safeway's gross margin by] 7 basis points."

Part of that low gross margin rate can be attributed to Blackhawk Network's acquisition last fall of Cardpool, a fast-growing gift card exchange company where consumers can buy, sell and trade gift cards online.

Depending on market conditions, the company anticipates executing a transaction in the first half of 2013.

Blackhawk Network supplies the industry's most popular prepaid gift cards and payment services from leading brands through a network of leading grocery stores, big box, convenience, pharmacy, specialty stores and Internet retailers including Blackhawk operates a proprietary network that connects to more than 500 content providers and over 70,000 active retail distribution locations globally.

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