Opinions expressed by Forbes Contributors are their own. 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. 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. Unlike the chain store business model, IGA operates as a franchise through stores that are owned separately from the brand. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Krogers $24.6 billion merger with Albertsons could be a year away from gaining regulatory clearance. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. Kroger and Albertsons say their merger, which they expect to complete in 2024, will help them compete against larger chains and benefit shoppers, workers and local communities. The. 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. It's not just regulators that could scuttle the merger, though. Albertsons announced the. The combined company will drive profitable growth and sustainable value for all stakeholders. 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. Additional Information About Albertsons Companies and Where to Find It. 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.. But as the potential buyer was going through due diligence and shortly after Albertsons financial advisers raised the idea of a multi-billion-dollar dividend payout to shareholders, the buyer walked away. The sky-high profits also attracted a suitor. 8:30 a.m. Kroger and Albertsons, which is based in Boise, Idaho, said Friday that they expected to close the deal in early 2024, and that Kroger would pay Albertsons $600 million if the merger fell apart . If a merger does . 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. Crain's reporter Ally Marotti and host Amy Guth discuss why Chicago's packaged-foods giants should be concerned about the proposed Kroger-Albertsons merger, and they talk about the challenges and . The potential 2024 merger between Kroger and Albertsons - Kroger agreed to purchase its competitor for almost $25 billion dollars received plenty of pushback when it was first announced. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. Albertsons Companies is a leading food and drug retailer in the United States. This deal would put all these brands in one basket. 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. Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. How big beyond store count will the new multi-billion-dollar company be in this food fight? Kroger Anyone can read what you share. 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. CINCINNATI and BOISE,Idaho, Oct. 14, 2022 /PRNewswire/ -- Kroger (NYSE: KR) and Albertsons Companies, Inc. (NYSE: ACI) today announced that they have entered into a definitive agreement under which the companies will merge two complementary organizations with iconic brands and deep roots in their local communities to establish a national footprint and unite around Kroger's Purpose to Feed the Human Spirit. 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. I am proud of what our 290,000 associates have accomplished, delivering top-tier performance while furthering our purpose to bring people together around the joys of food and to inspire well-being. Albertsons shareholders expect to receive $34.10 per share. The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. The deal, if approved by the Federal Trade Commission, would create a. There could be another bright side for smaller players facing big competitors. 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. 1 Based on combined results for each company's most recent fiscal year, respectively. 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. The combination of the two U.S. supermarket giants could have a three-pronged effect, resulting in doom for some, gloom for others, and a boom for still others. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. 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. 8:30 a.m. Still, to each their own. Chicago Other (552) Meijer (32) Kroger (60) Walmart (67) Aldi (157) Albertsons (179) Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. The regulatory review is in progress, as previously noted, but according to The New York Times, the two supermarket giants believe the merger will be approved sometime this year, albeit with strings attached; Meaning, a few hundred supermarket stores may have to be sold off. We are committed to creating #ZeroHungerZeroWaste communities by 2025. 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 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. Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' common stock have either delivered a written consent or committed to delivering a written consent approving the transaction no later than October 18, 2022 and Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' preferred stock have already approved the transaction. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. Mar 02, 2023. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. Steven Peterson. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. Consumer advocates speculated that the merging of the two supermarket giants would lead to increased prices in a time of already rampant food inflation, and democratic party senators Bernie Sanders and Elizabeth Warren both publicly backed the blocking of the acquisition by federal regulators, according to CNN Business. IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. In a statement, Kroger Chairman and CEO Rodney McMullen said, "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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
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. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. 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. 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. Kroger and Albertsons Companies Announce Definitive Merger Agreement October 14, 2022 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 24/7 coverage of breaking news and live events. Send any friend a story Watch out Walgreens? 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. Many of these stores operate in small-town markets and belong to families that manage them. 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. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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. In October, Kroger . To learn more about us, visit our newsroom and investor relations site. In 2021, along with the Albertsons Companies Foundation, the Company contributed nearly $200 million in food and financial support, including approximately $40 million through our Nourishing Neighbors Program to ensure those living in our communities have enough to eat. Additional Information About Albertsons Companies and Where to Find It. 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. We are committed to creating #ZeroHungerZeroWaste communities by 2025. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Digital boom helps Kroger in Q4, FY 2022 . "The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. Washington Analysis, a research firm in Washington, D.C., that focuses on political and regulatory policy, put the odds of the merger successfully closing at 35 percent. Kroger will also build on its recent investments in associate wages, training and benefits. The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. It could mean thinner margins for smaller, independent stores and some suppliers; more competition for larger players, and a possible boom for consolidation in the future. Rachel Shemirani of Barons Market believes that customers will search for that sense of community elsewhere. Shemirani believes customer service will be king, with flexibility, heart and passion at independent grocery stores. Albertsons Companies operates stores across 34 states and the District of Columbia with 24 banners including Albertsons Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci's Food Lovers Market. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. or Walmart, which control only a few brands. We may see mega-mergers create superpowers in the supermarket sector. Baked goods at a Kroger. We are, across our family of companies, nearly half a million associates who serve over 11 million customers daily through a seamless shopping experience under a variety of banner names. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. ", "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. The two. But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. But various efforts by the investors to find a lucrative way to cash out of the grocery store business have been thwarted several times as Albertsons has struggled with net losses for several years. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. 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. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA ACI 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, EBITDA Reconciliations1. 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. A reconciliation to historical non-GAAP figures is provided in the Appendix below. Kroger and Albertsons have extensive store overlap in Washington and other markets and are expected to spin off hundreds of stores to satisfy antitrust concerns. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. These include the specific risk factors identified in "Risk Factors" in each of Kroger's and Albertsons Companies' annual report on Form 10-K for the last fiscal year and any subsequent filings, as well as the following: the expected timing and likelihood of completion of the proposed transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory clearance of the proposed transaction; the impact and terms and conditions of any potential divestitures and/or the separation of SpinCo; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that may be instituted against the parties and others following announcement of the merger agreement and proposed transaction; the inability to consummate the proposed transaction due to the failure to satisfy other conditions to complete the proposed transaction; risks that the proposed transaction disrupts current plans and operations of Kroger and Albertsons Companies; the ability to identify and recognize the anticipated benefits of the proposed transaction, including anticipated TSR, revenue and EBITDA expectations and synergies; the amount of the costs, fees, expenses and charges related to the proposed transaction; and the ability of Kroger and Albertsons Companies to successfully integrate their businesses and related operations; the ability of Kroger to maintain an investment grade credit rating; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction. 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. 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. 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. 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. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. Smaller and bigger stores both can have a lot to offer. According to the Coresight. One of the main pillars highlighted as a way to accelerate Kroger's go-to-market strategy is to create a broader selection of products with higher quality and better value. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. 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). The deal is likely to . "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. For years, the grocery store industry had low growth yet was intensely competitive, with Walmart, Target, Costco and others increasingly elbowing their way into food shoppers carts. Such statements are indicated by words or phrases such as "accelerate," "create," "committed," "confident," "continue," "deliver," "driving," "expect," "future," "guidance," "positioned," "strategy," "target," "synergies," "trends," and "will."