Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. 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. The grocery giants Albertsons Companies and Kroger are in talks to combine in a deal that could be announced as soon as Friday, four people with knowledge of the plans said. The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA An on-demand replay of the webcast will be available at approximately 1:00 p.m. Albertsons wants to pay $4 billion to shareholders ahead of its proposed merger with Kroger, a move that would require the already debt-ridden company to borrow $1.5 billion. 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. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. 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. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. 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. Albertsons said it would immediately begin the process of paying the special dividend. It was founded in the United States as the Independent Grocers Alliance in 1926. For the private-equity giant Cerberus, which was co-founded by the billionaire Stephen Feinberg and oversees $60 billion in assets, getting into the grocery business was relatively easy. When completed, the information statement will be mailed to Albertsons Companies' stockholders. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. 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. The Kroger-Albertsons mega-merger would create a company with about 5,000 U.S. stores, a close second to Walmarts 5,335 in the United States. "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. 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. 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. That could occur in California, Texas, Washington, D.C. and/or Phoenix, among others. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. Publix caps year of new territory with sound Q4 results . IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. 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. 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. Opinions expressed by Forbes Contributors are their own. ET on October 14, 2022. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. National Leader, Food & Beverage Services Group, Marcum. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. 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. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. See the Appendix for a reconciliation of historical non-GAAP measures. 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. Still, to each their own. 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. 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. "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. 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. Research. It's not just regulators that could scuttle the merger, though. Today's announcement is a testament to their success," said Vivek Sankaran, CEO of Albertsons Cos. "At Albertsons Cos., we are guided by an ambition to create customers for life. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. 24/7 coverage of breaking news and live events. AMZN Send any friend a story 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. The deal,. 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. The nations top two retailers would control more than 70% of the grocery market in over 160 cities, according to Stacy Mitchell, of the Institute for Local Self-Reliance. 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 We look forward to working together with Kroger to capture the compelling opportunities ahead. These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. As a subscriber, you have 10 gift articles to give each month. Additional Information About Albertsons Companies and Where to Find It. The combined new Kroger is expected to divest 100 to. The deal is likely to . 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. 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. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. As a combined company, we will build on our similar values to create a culture that embraces diversity, equity and inclusion and fosters a best-in-class associate experience by enabling, supporting and empowering our associates to unlock their full potential. When completed, the information statement will be mailed to Albertsons Companies' stockholders. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. Kroger and Albertsons merger: What lies ahead? Adjustment for pension plan withdrawal liabilities, Adjustment for company-sponsored pension plan settlement charges, Adjustment for loss (gain) on investments, Adjustment for Home Chef contingent consideration, (Gain) loss on interest rate and commodity hedges, net, Gain on property dispositions and impairment losses, net, Government-mandated incremental COVID-19 pandemic related pay5, Amortization of debt discount and deferred financing costs, Amortization of intangible assets resulting from acquisitions, Combined Plan and UFCW National Fund withdrawal6, Tax impact of adjustments to Adjusted net income. 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. Citi and Wells Fargo Securities, LLC are serving as financial advisors and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel to Kroger. But some believe scale could lead to backlash, as some customers adopt a small-is-beautiful approach, believing smaller stores are closer to the customer. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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 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. Union officials have attacked the deal, saying it puts jobs at risk as antitrust regulators will probably force the sale of hundreds of grocery stores across the country. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. The combined company could. Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. and Albertsons The deal would go beyond food to include healthcare. 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. 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. ET. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. ", "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 combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. The higher profits allowed Albertsons to pay its shareholders nearly $500 million in dividends over the past three years. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. WMT Kroger and Albertsons together in fiscal 21 racked up $210 billion in revenue and $3.3 billion in net earnings, according to Supermarket News. Albertsons went public in the early months of the pandemic, but its offering was lackluster. 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. Costco controls another 9 percent. 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.. A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. Kroger Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. The worlds biggest retailer may be looking over its shoulder soon. Mar 02, 2023. ", "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. Weiser's office is now leading . The Kroger store in Houston and the Albertson's store in San Diego. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. EBITDA Reconciliations1. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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. "By bringing together Kroger's Fresh for Everyone strategy and Albertsons Cos.' Customers for Life strategy, the combined company will expand its portfolio of fresh products, extend shelf lives and accelerate the penetration of its Fresh portfolio.". Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. 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. An infographic to depict the Kroger acquisition of Albertson's. Our story with Albertsons is one of a long-term partnership that has created thousands of union careers and invested billions into stores, infrastructure and local communities, Cerberus said in a statement. Net earnings attributable to The Kroger Co. are planning a merger that would create a superstore second in scale only to Walmart How big beyond store count will the new multi-billion-dollar company be in this food fight? So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? 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. 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. Kroger has already paused its share repurchase program to prioritize de-leveraging following the merger to achieve its net leverage target of 2.5x EBITDA in the first 18 24 months post close. 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 companies said they plan to continue with their shared track record to lower prices, enhance customer experience and increase associate wages and benefits. 'The addition of Albertsons Cos.' sustainability program and resources will accelerate progress on Kroger's Zero Hunger, Zero Waste social and environmental impact plan to create a more equitable and sustainable food system," the release said. Appendix: "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. Getting out has proved much more difficult. Turn on desktop notifications for breaking stories about interest? 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. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". 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 . 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. ACI 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. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. But for Albertsons, the pandemic significantly changed its fortunes. The. Bloomberg via Getty Images, FILE|Getty Images, FILE. Krogers $24.6 billion merger with Albertsons could be a year away from gaining regulatory clearance. If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. 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). "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.". Watch out Walgreens? 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. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. 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. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. 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. 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. 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. "The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. You may obtain copies of all documents filed by Albertsons Companies with the SEC regarding this transaction, free of charge, at the SEC's website, www.sec.gov or from Albertsons Companies's website www.albertsonscompanies.com/investors. 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. The conference call will broadcast online at ir.kroger.com. 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). Citi and Wells Fargo Securities, LLC are serving as financial advisors and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel to Kroger. News > . Is my store going to be one that closes? EBITDA Reconciliations1. 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. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. 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. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. Kroger has already paused its share repurchase program to prioritize de-leveraging following the merger to achieve its net leverage target of 2.5x EBITDA in the first 18 24 months post close. 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. Arun Sundaram of CFRA Research expects Albertsons to divest 100 to 375 overlapping store locations. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. The deal, if approved by the Federal Trade Commission, would create a. 1Pro forma results presented in this presentation represent the combined Kroger and Albertsons 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.2Transformation costs primarily include costs related to store and business closure costs and third party professional consulting fees associated with business transformation and cost saving initiatives.3Includes costs related to closures of operating facilities and third-party consulting fees related to strategic priorities and associated business transformation.4Related to conversion activities and related costs associated with integrating acquired businesses. Steven Peterson. The financial implications of the deal are enormously complex and complicated further by Albertsons existing debt, which, per Seeking Alpha, currently exceeds $13 billion dollars.