Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. Albertsons Companies is a leading food and drug retailer in the United States. 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. Baked goods at a Kroger. See the Appendix for a reconciliation of historical non-GAAP measures. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. This included Cerberus, a private equity firm that is a major shareholder in Albertsons and stands to see substantial payouts through dividends and even more substantial payouts if the merger eventually goes through. Its only natural for them to want to seek an exit., Kroger-Albertsons Merger Faces Long Road Before Approval, https://www.nytimes.com/2023/01/23/business/kroger-albertsons-merger.html. 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. 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. How big beyond store count will the new multi-billion-dollar company be in this food fight? The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. Still, to each their own. The deal is likely to . 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. 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. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. Betting on the outcome of a merger or acquisition is always tricky business. 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. 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. See the Appendix for a reconciliation of historical non-GAAP measures. 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). According to Greg Ferrara of the National Grocers Association, the merger could give a single supermarket giant additional control over the nations food supply chain. This could lead to even tougher competition for smaller stores, although Kroger and Albertsons argue it could lead to better prices for consumers. Costco controls another 9 percent. 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. 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. But the Albertsons shareholders have been hanging on to this company, or its predecessor, for almost 17 years, and thats a very long holding period for private equity firms. It also could mean a stronger second nipping at the heels of Walmart. 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. The combined company will drive profitable growth and sustainable value for all stakeholders. 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. 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. "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. The two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. A lot, actually. Closings can lead to some openings for competitors, giving them room to grow. Also includes expenses related to management fees paid in prior fiscal years in connection with acquisition and financing activities.5Represents incremental pay that is legislatively required in certain municipalities in which Albertsons operates.6Related to the Combined Plan during the fourth quarter of fiscal 2021.7Miscellaneous adjustments include non-cash lease-related adjustments, lease and lease-related costs for surplus and closed stores, net realized and unrealized gain on non-operating investments, certain legal and regulatory accruals and settlements, net and other (primarily includes adjustments for pension settlement gain, unconsolidated equity investments and certain contract terminations). 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. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Publix caps year of new territory with sound Q4 results . 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. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. It was founded in the United States as the Independent Grocers Alliance in 1926. 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. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. 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). Adding or increasing robotics like Ocado customer fulfillment centers could help grow margins, not just critical mass, according to Fenyo. Kroger will also build on its recent investments in associate wages, training and benefits. The S in superstore could stand for synergy as well as savings for the new company. 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. Krogers $24.6 billion merger with Albertsons could be a year away from gaining regulatory clearance. Last month, Reuters reported that range has been narrowed. Pro Forma Adjusted The deal,. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. Krogers partnership with the Ocado Group has already led to about 20 automated customer fulfillment centers and other facilities, while Albertsons has focused on Instacart, DoorDash, and Uber Eats, according to Supermarket News. We may see mega-mergers create superpowers in the supermarket sector. 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 Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. BAC In Colorado, Kroger operates 148. Albertsons went public in the early months of the pandemic, but its offering was lackluster. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . 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. The deal could create "a more formidable. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. 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. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. Fresh Take: A Make-Or-Break Food Trade Show, Inside The Food Labor Movement: An Update From Starbucks Front Lines, Its The Gourmet Toast Driving Expansion At Toastique, Fungi-Based Protein Company Meati Launches Scientific Advisory Board To Support Scale-Up, Nutrition Research, City Saucery Takes Pride In Its Ugly Tomato Sauces, By Helping The Ukrainian Community In Manhattan, Veselka Earns A James Beard Nomination For Outstanding Restaurant, French Wine Region Bourgogne Should No Longer Be Translated To Burgundy. 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 . 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 in October 2022. 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. Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. 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. 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. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. An on-demand replay of the webcast will be available at approximately 1:00 p.m. Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. 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. 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 profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. 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. 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. 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. 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. 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 An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? 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." 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. Pro Forma Adjusted Steven Peterson. 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. 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. If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. 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. When completed, the information statement will be mailed to Albertsons Companies' stockholders. 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. Watch out, Walmart? 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. "At a time when people are increasingly shopping for groceries and eating at home, Kroger and Albertsons Cos. will be better positioned to relieve the inflationary pressures facing shoppers with a combined portfolio of approximately 34,000 total private label products across premium, natural and organic, and opening price point brands," the news release stated. Related: U.S. Senate to put Kroger-Albertsons merger under microscope Based on fiscal 2021 data, Kroger and Albertsons combined generated about $210 billion in revenue, $3.3 billion in net . Is my store going to be one that closes? 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 shareholders expect to receive $34.10 per share. The companies have said regulatory approval for the complicatedtransactionwont happen until early next year and may require the sale or spinoff of hundreds of grocery stores. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. 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. 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. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. "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," the company stated in its news release. 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. An infographic to depict the Kroger acquisition of Albertson's. 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, "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.". That is on top of the $1.5 billion in profits theyve already made and the $3 billion from their share of the dividend when it is paid. 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. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. That could occur in California, Texas, Washington, D.C. and/or Phoenix, among others. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. 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). 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 CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. This deal would put all these brands in one basket. 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. 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. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. A reconciliation to historical non-GAAP figures is provided in the Appendix below. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. Bloomberg via Getty Images, FILE|Getty Images, FILE. Albertsons was even able to buy back several of the stores . The Cincinnati-based company is the second-largest grocer by market share in the United States, behind. 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. 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. Net earnings attributable to The Kroger Co. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. Kroger and Albertsons merger: What lies ahead?
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