Once described as looking more like a high school teacher than a hard-boiled grocery store executive, Peter A. Magowan has proved a take-charge type during his dozen years at the helm of Safeway.
At 37 he took command of a grocery chain founded by his grandfather and fashioned by his father into the nation's largest and most profitable. Alas, by 1986, slow-to-change Safeway was lagging far behind the competition and fending off a hostile takeover bid from the Haft Family of Washington, D.C.
Magowan turned to the junk-bond takeover artists at Kohlberg Kravis Roberts for help. They spun Safeway a web of $5.7-billion in debt to buy the company and take it private. Wall Street widely touted the deal as one of the few examples of a 1980s-style leveraged buyout that worked.
And, indeed, Magowan saved a troubled company in danger of becoming a dinosaur. But at what cost has been a subject of debate.
Susan Faludi, later author of the 1992 feminist book Backlash, won a Pulitzer Prize at the Wall Street Journal chronicling the pain and suffering the buyout exacted on Safeway employees. More than 60,000 lost their jobs. Eleven divisions were sold. Unions complained tens of thousands who stayed were forced to accept pay and benefit cuts or lose their jobs.
Magowan picked up $5.2-million selling his shares in the deal. He then bought back in, and six years later a slimmed-down Safeway has whittled its debt down to$3-billion.
Magowan's shares are now worth about $20-million, according to Securities and Exchange Commission records. His annual salary as chief executive is $1.3-million. He is on the board of directors of Chrysler Corp., the San Francisco Giants and Vons Cos., a job he got as part of a plan to pay off buyout debt when Safeway had to sell 803 stores to a one-time competitor in return for 30 percent ownership of Vons.
Born in New York City 50 years ago, Magowan was groomed to take over for his father at Safeway. He has a business degree from Stanford, a master's from Oxford and studied international relations at Johns Hopkins University. But he spent summers bagging groceries at Safeway.
His first job was as a Safeway real estate negotiator in 1968. Then he shifted to store manager. Within five years he was a company director and overseeing a division with more than 500 stores.
Magowan has rebuilt Safeway to 1,117 stores, 115,000 employees and earned respect from industry analysts who once questioned his decisions to build new, more productive stores instead of using more cash to pay down debt.
"These programs have enabled Safeway to maintain market share," said Jonathon Ziegler, an analyst with Sutro & Co. in San Francisco.
Safeway's spartan headquarters is in one of Oakland's grimier industrial neighborhoods, perhaps a fitting backdrop for Magowan's still occasional bouts with the Teamsters union.
But these days Magowan prefers to talk about Safeway's slick new stores and two successful stock offerings, about 10 percent of which were snapped up by Safeway employees.
_ Times researchers Kitty Bennett and Barbara Hijek contributed to this report.