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 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. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". The new entity would mean some competitors stores might close, as more local grocers are driven out of business, Mitchell said. 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. In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. While Kroger-Albertsons would be a big deal, it would be very different from either Amazon The two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. 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. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. 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 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. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results. 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. 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. 1 Based on combined results for each company's most recent fiscal year, respectively. 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. 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, 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. Betting on the outcome of a merger or acquisition is always tricky business. 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 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. See the Appendix for a reconciliation of historical non-GAAP measures. 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. To learn more about us, visit our newsroom and investor relations site. The proposed merger has drawn opposition from consumer advocates and union officials. 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. We could see a big data, high-tech boom fueled by deep pockets. Albertsons went public in the early months of the pandemic, but its offering was lackluster. 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. . He has advised domestic and foreign clients in the tax-efficient structuring of legal entities, effective tax rate planning, mergers and acquisitions, corporate reorganizations, treasury. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. Opinions expressed by Forbes Contributors are their own. 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. We look forward to working together with Kroger to capture the compelling opportunities 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. 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. 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. "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. 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. Albertsons said it would immediately begin the process of paying the special dividend. 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. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. 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, That could lead to some small store closings and some huge players getting even bigger. The S in superstore could stand for synergy as well as savings for the new company. or Walmart, which control only a few brands. 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." Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. There could be another bright side for smaller players facing big competitors. Smaller and bigger stores both can have a lot to offer. "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.". Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. 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 Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. We may see mega-mergers create superpowers in the supermarket sector. "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.". If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. The Kroger store in Houston and the Albertson's store in San Diego. Closings can lead to some openings for competitors, giving them room to grow. 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. 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. In a move to reshape the U.S. supermarket landscape, Kroger and Albertsons Cos. The US's two biggest grocery store chainsannounced plans to join forces in mid-October. But for Albertsons, the pandemic significantly changed its fortunes. And even independent grocery store chains are fretting about the merger, saying it will result in higher food prices and make the already competitive landscape more difficult. Kroger has a track record of successful integrations that combine the strengths of each company while maintaining and enhancing each organizations' distinctive banners and storied histories. 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. There could still be some winners among smaller players who find a space to thrive. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. That is especially true of supermarket giant Kroger 's proposed purchase of rival Albertsons. Albertsons Companies is a leading food and drug retailer 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. Kroger-Albertsons Merger Faces Long Road Before Approval Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for. 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. A merger would not only put smaller competitors at an unfair disadvantage, but also increase anticompetitive buyer power over grocery suppliers, which ultimately would harm consumers, Ferrara said. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. 8:30 a.m. Digital boom helps Kroger in Q4, FY 2022 . Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. 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. Is my store going to be one that closes? Combined, the stores employ more than 700,000 people across 5,000 stores. Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located near other stores and could be considered redundant if the chains . National Leader, Food & Beverage Services Group, Marcum. 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. 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 Cincinnati-based company is the second-largest grocer by market share in the United States, behind. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. 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. It's not just regulators that could scuttle the merger, though. 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. 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. are planning a merger that would create a superstore second in scale only to Walmart Baked goods at a Kroger. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. The powerful union is worried about lost jobs for their members in the event regulators mandate the sale of hundreds of supermarkets. This is a BETA experience. 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. The. 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. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. An on-demand replay of the webcast will be available at approximately 1:00 p.m. 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. 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. How big beyond store count will the new multi-billion-dollar company be in this food fight? The deal is likely to . The CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. Net earnings attributable to The Kroger Co. 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. 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. 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. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. About a year later, more stores were added when the group contributed $1.25 billion to acquire more than 1,300 stores from Safeway. 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. 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). That means the top three grocers would control more than half of the sector. 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. ", Accelerates Kroger's Go-to-Market Strategy. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. 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. As part of the $9 billion deal, Albertsons sold the stores to a smaller grocery chain, Haggen, which previously had less than 20 stores. See the Appendix for a reconciliation of historical non-GAAP measures. The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. 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. The conference call will broadcast online at ir.kroger.com. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Chicago Other (552) Meijer (32) Kroger (60) Walmart (67) Aldi (157) Albertsons (179) Coresights report on regional consolidation of grocery chains showed that from 2015 to 2020 M&A grew national giants market share as they gobbled up midsize regional competitors and otherwise expanded. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. 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. Cerberus moved into the grocery business 17 years ago when it acquired 655 struggling stores owned by Albertsons sprinkled around Florida, Texas and Northern California for $350 million in equity. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. Most recently, T&T opened a 40,000-square-foot store at the Willowbrook Shopping Centre in Langley, B.C. 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..
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