Downtown Cincinnati-based Kroger (NYSE: KR), the nation's largest operator of traditional supermarkets, and Albertsons, agreed Oct. 13 to the $24.6 billion acquisition which comes to $34.10 per. There could still be some winners among smaller players who find a space to thrive. The Kroger-Albertsons mega-merger would create a company with about 5,000 U.S. stores, a close second to Walmart's 5,335 in the United States. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. Goldman Sachs & Co. LLC and Credit Suisse are serving as financial advisors and Jenner & Block LLP is serving as corporate legal counsel and White & Case LLP and Debevoise & Plimpton LLP are serving as antitrust legal counsel to Albertsons Cos. At The Kroger Co. (NYSE: KR), we are Fresh for Everyone and dedicated to our Purpose: To Feed the Human Spirit. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. To learn more about us, visit our newsroom and investor relations site. Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. The deal would go beyond food to include healthcare. For most buyout funds, the hope is to fix or improve the company and make profits in a public offering or by selling the company to another buyer within four to seven years. Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. As described in the merger agreement and subject to the outcome of the divestiture process, Albertsons Cos. is prepared to establish an Albertsons Cos. subsidiary (SpinCo). "We have been on a transformational journey to evolve Albertsons Cos. into a modern and efficient omnichannel food and drug retailer focused on building deep and lasting relationships with our customers and communities. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. KR The cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately $6.85 per share. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. The new entity would mean some competitors stores might close, as more local grocers are driven out of business, Mitchell said. Kroger, the second largest grocery store chain, purchased the fourth largest, Albertsons, for an estimated total enterprise value of $24.6 billion, the company announced in a news release Friday. In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million. As of June 18, 2022, Albertsons Companies operated 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. Cerberus moved into the grocery business 17 years ago when it acquired 655 struggling stores owned by Albertsons sprinkled around Florida, Texas and Northern California for $350 million in equity. Albertsons announced it would pay shareholders about $4bn in special dividends as part of the merger agreement, which would see Kroger spending $24.6bn to acquire Albertsons, with. This cash dividend is expected to be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. Is my livelihood going to go away? asked Kyong Barry, 60, a front-end manager at a Safeway in Auburn, Wash. She is a member of the United Food and Commercial Workers International Union, which has 350,000 members working in stores owned by Kroger and Albertsons. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. Getting out has proved much more difficult. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. In addition to company stores, Albertsons operates Safeway, Vons, Jewel-Osco, Shaws, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balduccis Food Lovers Market. Kroger, the second largest grocery store chain, purchased the fourth largest, Albertsons, for an estimated total enterprise value of $24.6 billion, the company announced in a news release Friday. A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers, Ferrara said. Although Kroger and Albertson's are the largest grocery-only companies in the country, they are falling behind in online, the key change happening to the industry. Kroger announced Friday that it plans to buy Albertsons in a nearly $25 billion deal that could change the US retail industry and impact how millions of customers buy their groceries. An on-demand replay of the webcast will be available at approximately 1:00 p.m. "This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. Kroger and Albertsons Companies Announce Definitive Merger Agreement Company Release - 10/14/2022 Download the PDF versionPDF Format (opens in new window) Establishes National Footprint to Serve America with Fresh, Affordable Food for Everyone Combines Two Companies with Shared Values to Unite Around Kroger's Purpose to Feed the Human Spirit The combination creates a premier seamless ecosystem across 48 states and the District of Columbia, providing customers with a best-in-class shopping experience across both stores and digital channels. Subject to the outcome of a store divestiture process, the cash component of the $34.10 per share consideration may be reduced by the per share value of a newly created standalone public company ("SpinCo") that Albertsons Cos. is prepared to spin off at closing in conjunction with the regulatory clearance process described further in the Transaction Details below. Closings can lead to some openings for competitors, giving them room to grow. News > . Together with Kroger, our combined iconic banners will be able to provide customers with even more value and greater access to fresh food and essential pharmacy services. They push down, and the consumer packaged goods companies have no option but to supply them at their demands, leaving rural stores with higher costs and less availability to products.. "This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans. Mergers like this could accelerate the use of technology such as big data and e-commerce in the F&B industry, feeding into an online sales boom. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. According to the Coresight. The returns will ultimately be pretty good and probably beat the stock market over the length of the investment, said Jeffrey Hooke, a former investment banker and author of the book The Myth of Private Equity, who is now a finance lecturer at Johns Hopkins Carey Business School. Delivering Quality, Value, Convenience and Choice for Customers, Continuing Track Record of Investments Across Lowering Prices, Enhancing the Customer Experience, and Increasing Associate Wages and Benefits, Strengthens Kroger's Value Creation Model to Drive Profitability and Enhance Shareholder Returns, Albertsons Companies Shareholders Expected to Receive Total Consideration Valued at $34.10 Per Share, Kroger to Host Conference Call at The combined new Kroger is expected to divest 100 to. This press release contains certain statements that constitute "forward-looking statements" within the meaning of federal securities laws, including statements regarding the effects of the proposed transaction. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . Kroger (KR) and Albertsons, which both employ mostly union workforces, want to merge to be more competitive against non-union giants such as Walmart (WMT), Amazon (AMZN), and Costco (COST). The buyout group, which owns 73 percent of the company, will receive the biggest share of the dividend, or $3 billion, of which $2.5 billion will come from cash and about $1.5 billion will be borrowed and put on Albertsons balance sheet. This potential divestiture is what most complicates the merger's chances of success moving forward, since, as The New York Times notes, it's unknown how many stores may have to be divested and what that could do to stock prices. We look forward to working together with Kroger to capture the compelling opportunities ahead. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. ", "Utilizing Kroger's End-to-End Fresh initiative across a broader network will enable the combined company to optimize its supply chain to deliver the freshest products from field to table to more customers more quickly," the company stated. He has advised domestic and foreign clients in the tax-efficient structuring of legal entities, effective tax rate planning, mergers and acquisitions, corporate reorganizations, treasury. More mergers and less competition would mean even higher prices - and layoffs for employees.". The conference call will broadcast online at ir.kroger.com. Albertsons said in a statement that it had grown tremendously with the help of our sponsors and other investors. It added that it had spent billions of dollars to modernize its stores and build digital and technology platforms, as well as to improve associate wages, benefits and training programs. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". Numerator.com said Albertsons has been able to retain and develop habitual shopping online, with shoppers picking-up in-store through the companys Drive-Up & Go offering. Steven Peterson. This press release contains certain statements that constitute "forward-looking statements" within the meaning of federal securities laws, including statements regarding the effects of the proposed transaction. In addition to stores with the company name, Kroger controls Ralphs, Dillons, Smiths, King Soopers, Frys, QFC, City Market, Owens, Jay C, Pay Less, Bakers, Gerbes, Harris Teeter, Pick N Save, Metro Market, Marianos, Fred Meyer, Food 4 Less and Foods Co. The deal, if approved by the Federal Trade Commission, would create a. Establishes National Footprint to Serve America with Fresh, Affordable Food for Everyone, Combines Two Companies with Shared Values to Unite Around Kroger's Purpose to Feed the Human Spirit, Accelerates Kroger's Go-to-Market Strategy and Positions Combined Company as a Premier Omnichannel Food Retailer, Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located near other stores and could be considered redundant if the chains . Reuters reported last month that the Federal Trade Commission had asked Kroger to supply more information about the proposed merger. Kroger Chairman and CEO Rodney McMullen says the deal brings together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders. It could be part of a consolidation wave as companies continue to grow by merger. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". This is a very scary time for us while they try to pay themselves $4 billion that we helped them make, she said. The transaction is expected to close in early 2024, subject to the receipt of required regulatory clearance and other customary closing conditions, including receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. Kroger plans to buy Albertsons in a deal valued at $24.6 billion, a merger that would combine the two largest grocery-store chains in the U.S., the companies said on Friday. However, as The New York Times noted at the time of the initial announcement, the deal is by no means a certainty, even if it's okayed by regulators. An infographic to depict the Kroger acquisition of Albertson's. According to Numerator.com, Albertsons has been growing e-commerce sales rapidly with more households shopping online and using its successful click & collect strategy.. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. The CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. National Leader, Food & Beverage Services Group, Marcum. Please refer to the reports and filings of Kroger and Albertsons Companies with the Securities and Exchange Commission for a further discussion of the risks and uncertainties that affect them and their respective businesses. Ever since the pending megamerger between Kroger and Albertsons, the two largest grocery store chains in the country, was announced in October, the companies have argued that the marriage will be good for consumers, employees and communities. Through a family of well-known and trusted supermarket banners, this combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience. "The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. That could be another $4 a share, which means, at the end of the day, if the deal goes forward, shareholders could receive $23 a share by our estimate.. Is my store going to be one that closes? We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. The purchase price represents a premium of approximately 32.8% to the unaffected closing price of Albertsons Cos. common stock on October 12, 2022, and 29.7% to the 30-day volume-weighted average price. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. To learn more about us, visit our newsroom and investor relations site. ET Today, October 14, 2022. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. We may see mega-mergers create superpowers in the supermarket sector. ET on October 14, 2022. The merger of Kroger and Albertsons would put control of the grocery industry into the hands of [+] three companies, which together would represent more than half of the sector by revenue. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors. Together, Albertsons Cos. and Kroger currently employ more than 710,000 associates and operate a total of 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers. As described in the merger agreement and subject to the outcome of the divestiture process, Albertsons Cos. is prepared to establish an Albertsons Cos. subsidiary (SpinCo). Albertsons said it would immediately begin the process of paying the special dividend. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. "We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders," said Rodney McMullen, Kroger Chairman and Chief Executive Officer, who will continue serving as Chairman and CEO of the combined company. Hy-Vee is a dominant player in the Midwest, while Wakefern is a major player in the Northeast through ShopRite, Price Rite, Fairway, and many others. An on-demand replay of the webcast will be available at approximately 1:00 p.m. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. Combined, the stores employ more than 700,000 people across 5,000 stores. One potential legal hurdle was recently cleared when the state of Washington's Supreme Court refused to hear a case that could have blocked $4 billion in dividend payouts to those with stock shares in Albertsons, The New York Times reported. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. View original content to download multimedia:https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Sign Up to Receive the Latest Kroger News and Releases, Kroger and Albertsons Companies Announce Definitive Merger Agreement, Government-mandated incremental COVID-19 pandemic related pay, Combined Plan and UFCW National Fund withdrawal, Information Concerning the Board of Directors, https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html. Under the terms of the merger agreement, which has been unanimously approved by the board of directors of each company, Kroger will acquire all of the outstanding shares of Albertsons Companies, Inc. ("Albertsons Cos.") common and preferred stock (on an as converted basis) for an estimated total consideration of $34.10 per share, implying a total enterprise value of approximately $24.6 billion, including the assumption of approximately $4.7 billion of Albertsons Cos. net debt. The transaction is expected to advance Kroger's strategy of Leading with Fresh, Accelerating with Digital and will enable the combined company to build on Kroger's go-to-market strategy that includes Fresh, Our Brands, Personalization and Seamless. ", "Today's announcement marks the successful outcome of the Board-led review of strategic alternatives Albertsons Cos. announced in February," said Chan Galbato, Co-Chair of the Albertsons Cos. Board of Directors and Chief Executive Officer of Cerberus Operations. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. Consistent with prior transactions, Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers. As a combined entity, we will be better positioned to advance Kroger's successful go-to-market strategy by providing an incredible seamless shopping experience, expanding Our Brands portfolio, and delivering personalized value and savings. Weiser's office is now leading . The conference call will broadcast online at ir.kroger.com. There could be another bright side for smaller players facing big competitors. The Cincinnati-based company is the second-largest grocer by market share in the United States, behind. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. Kroger ", Accelerates Kroger's Go-to-Market Strategy. Albertsons profits rose during the pandemic to $1.6 billion in 2021 from $466 million in 2019. BAC When completed, the information statement will be mailed to Albertsons Companies' stockholders. The combined company will drive profitable growth and sustainable value for all stakeholders. Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. Albertsons Companies is a leading food and drug retailer in the United States. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. In early 2022, a grocery store chain identified as Party A in securities filings emerged with an offer to buy Albertsons for $41 a share. Corporate buyout specialists generally raise money from big investors, like pension funds for state employees, teachers, police officers and firefighters, and then buy undervalued or underappreciated companies. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results. The purchase price represents a premium of approximately 32.8% to the unaffected closing price of Albertsons Cos. common stock on October 12, 2022, and 29.7% to the 30-day volume-weighted average price. Pro Forma Adjusted The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA We'll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. We could see a big data, high-tech boom fueled by deep pockets. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. Kroger could leverage Albertsons successful digital strategy investments to help implement similar initiatives for their own online services, according to Numerator.com. Anyone can read what you share. But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. As part of the $9 billion deal, Albertsons sold the stores to a smaller grocery chain, Haggen, which previously had less than 20 stores. T&T Supermarkets. The establishment of SpinCo, which is estimated to comprise between 100 and 375 stores, would create a new, agile competitor with quality stores, experienced management, operational flexibility, a strong balance sheet, and focused allocation of capital and resources to provide customers with continued value and quality service and associates with ongoing compelling career opportunities. The companies said they plan to continue with their shared track record to lower prices, enhance customer experience and increase associate wages and benefits. Still, the investors sold $800 million worth of shares, andanother $1.7 billion was raised from some hedge funds and used to do a share buyback. The worlds biggest retailer may be looking over its shoulder soon. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. The Kroger-Albertsons mega-merger could redraw the national map in terms of market share and other ways as consolidation continues. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. He added that "as a combined entity, we will be better positioned to advance Kroger's successful go-to-market strategy" with respect to their seamless shopping experience, portfolio of brands, and personalized value and savings. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. Coresights report on regional consolidation of grocery chains showed that from 2015 to 2020 M&A grew national giants market share as they gobbled up midsize regional competitors and otherwise expanded. Appendix: Kroger and Albertsons Companies are unable to provide a full reconciliation of the non-GAAP measures used in the forward-looking measures without unreasonable effort because it is not possible to predict with a reasonable degree of certainty the information necessary to calculate such measures on a GAAP basis because such information is dependent on future events that may be outside of Kroger's and Albertsons Companies' control. AMZN Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve. In 2013, the investors put up $100 million in cash and took out $3.2 billion of debt to acquire more than 800 stores from Supervalu. Albertsons Companies is a leading food and drug retailer in the United States. This deal would put all these brands in one basket. This press release also includes certain forward-looking non-GAAP financial measures, which Kroger and Albertsons Companies management believe to be useful to investors and analysts. The. You may opt-out by. The ability of Kroger and Albertsons Companies to achieve the goals for the proposed transaction may also be affected by their ability to manage the factors identified above. The deal could create "a more formidable. 24/7 coverage of breaking news and live events. We'll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. The cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately $6.85 per share. Our merger with Albertsons provides meaningful, measurable benefits to Americas consumers, associates of both companies and the communities we serve, Kroger said in a statement. Following the close of the transaction, Rodney McMullen will continue to serve as Chairman and Chief Executive Officer and Gary Millerchip will continue to serve as Chief Financial Officer of the combined company. The transaction is expected to close in early 2024, subject to required regulatory clearance and closing conditions, according to the company's investor relations site. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. Pro forma results as presented in this press release represent the combined Kroger and Albertsons Cos. FY 2021 results and are not intended to represent pro forma financials under Section 11 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Additional Information About Albertsons Companies and Where to Find It. Kroger and Albertsons Companies are unable to provide a full reconciliation of the non-GAAP measures used in the forward-looking measures without unreasonable effort because it is not possible to predict with a reasonable degree of certainty the information necessary to calculate such measures on a GAAP basis because such information is dependent on future events that may be outside of Kroger's and Albertsons Companies' control.
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