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. As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. When completed, the information statement will be mailed to Albertsons Companies' stockholders. 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). 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. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. 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. 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. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer 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. Another huge grocery retailer could put more pressure on smaller players and change the balance of power in working with suppliers. ", Accelerates Kroger's Go-to-Market Strategy. three companies, which together would represent more than half of the sector by revenue. In other instances, the debt piled on the company for the buyout overwhelms it, as was the case in 2016 and again in 2020 when the New York grocery chain Fairway Markets filed for bankruptcy. ", Additionally, Kroger said it expects this deal will enable the company to "serve America with fresher food, faster" with its "expanded network of stores and distribution centers, as well as a broader supplier base. 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. 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 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. 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. 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. For the buyout firms and other investors, which had about $2 billion invested in total in the various grocery store acquisitions, their 73 percent stake in Albertsons would be valued at more than $9 billion. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. 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. 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. Betting on the outcome of a merger or acquisition is always tricky business. Closings can lead to some openings for competitors, giving them room to grow. The grocery chain Kroger announced plans Friday to buy competitor Albertsons for $24.6 billion, potentially creating a grocery empire spanning the United States. Kroger and Albertsons together in fiscal 21 racked up $210 billion in revenue and $3.3 billion in net earnings, according to Supermarket News. WMT 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. A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. In Colorado, Kroger operates 148. 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. 8:30 a.m. 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. 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. The deal is likely to . Dec 13, 2022. Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. Kroger and Albertsons Cos. have agreed to work together to determine which stores would comprise SpinCo, as well as the pro forma capitalization of SpinCo. Albertsons said it would immediately begin the process of paying the special dividend. To learn more about us, visit our newsroom and investor relations site. How big beyond store count will the new multi-billion-dollar company be in this food fight? Combined, the stores employ more than 700,000 people across 5,000 stores. 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. 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 deal,. 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. 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. About a year later, more stores were added when the group contributed $1.25 billion to acquire more than 1,300 stores from Safeway. Net earnings attributable to The Kroger Co. 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. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. 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. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . A reconciliation to historical non-GAAP figures is provided in the Appendix below. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. ", "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. and Albertsons Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. 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. 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 . Appendix: 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 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. Reuters reported last month that the Federal Trade Commission had asked Kroger to supply more information about the proposed merger. 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. Kroger and Albertsons merger: What lies ahead? Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. ", "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. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. 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. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. "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. Baked goods at a Kroger. While Kroger-Albertsons would be a big deal, it would be very different from either Amazon The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. 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. Watch out, Walmart? "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. 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 Kroger-Albertsons mega-merger could redraw the national map in terms of market share and other ways as consolidation continues. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. 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. 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." ET Today, October 14, 2022. 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. "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Additional Information About Albertsons Companies and Where to Find It. 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. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. See the Appendix for a reconciliation of historical non-GAAP measures. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. 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. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. 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). Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. "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 two. We may see mega-mergers create superpowers in the supermarket sector. "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. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. 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 But for Albertsons, the pandemic significantly changed its fortunes. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. National Leader, Food & Beverage Services Group, Marcum. 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. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. Unlike the chain store business model, IGA operates as a franchise through stores that are owned separately from the brand. Watch out Walgreens? 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. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. 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. 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. "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 forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. 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. 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 forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. According to the Coresight. It should come as no surprise, then, that a Washington D.C.-based research company well-versed in these sorts of mergers gives this one only a 35% chance of actually happening, per The New York Times. Kroger initially said after the Albertsons deal was finalized Oct. 13, 2022, it expected to sell somewhere between 100 and 375 stores. ET Today, October 14, 2022. The new entity would mean some competitors stores might close, as more local grocers are driven out of business, Mitchell said. 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. 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, A lot, actually. BAC Net earnings attributable to The Kroger Co. 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 Kroger store in Houston and the Albertson's store in San Diego. 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. Opinions expressed by Forbes Contributors are their own. Kroger will also build on its recent investments in associate wages, training and benefits. 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. There could be another bright side for smaller players facing big competitors.
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