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. 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. 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. Robert Ohmes of Bank of America Kroger will also build on its recent investments in associate wages, training and benefits. 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. According to the Coresight. As of June 18, 2022, Albertsons Companies operated 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. Kroger An on-demand replay of the webcast will be available at approximately 1:00 p.m. "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.". Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. 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. We are committed to creating #ZeroHungerZeroWaste communities by 2025. Kroger and Albertsons Companies Announce Definitive Merger Agreement 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. 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. '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. Kroger plans to buy Albertsons in a deal valued at $24.6 billion, a merger that would combine the two largest grocery-store chains in the U.S., the companies said on Friday. The higher profits allowed Albertsons to pay its shareholders nearly $500 million in dividends over the past three years. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. I believe this merger is the beginning of a trend and that we could see more consolidation, according to Ken Fenyo, of Coresight Research. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. Kroger, Albertsons announce $24.6 billion merger - The Washington Post Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million. Additional Information About Albertsons Companies and Where to Find It. 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. "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. It's not just regulators that could scuttle the merger, though. 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 . What the proposed Albertsons-Kroger merger could mean in Alaska Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. 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 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. We could see a big data, high-tech boom fueled by deep pockets. 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. ET Today, October 14, 2022. 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. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. In addition to company stores, Albertsons operates Safeway, Vons, Jewel-Osco, Shaws, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balduccis Food Lovers Market. 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. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. 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. 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. Here's what could stop Kroger's takeover of Albertson's 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. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. 24/7 coverage of breaking news and live events. Reuters reported last month that the Federal Trade Commission had asked Kroger to supply more information about the proposed merger. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. 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 ability of Kroger and Albertsons Companies to achieve the goals for the proposed transaction may also be affected by their ability to manage the factors identified above. Albertsons Companies is a leading food and drug retailer in the United States. 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. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". Costco controls another 9 percent. That could occur in California, Texas, Washington, D.C. and/or Phoenix, among others. The deal,. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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.. EBITDA Reconciliations1. 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. Steven Peterson. 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. Two major U.S. supermarkets will combine forces after a unanimous all-cash merger agreement was reached between the boards of Kroger and Albertsons. 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. 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. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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/Albertsons grocery merger deserves a thorough anti-trust legal Kroger-Albertsons merger: Looking at the numbers 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. Appendix: Albertsons Companies is a leading food and drug retailer in the United States. View original content to download multimedia:https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Kroger and Albertsons Companies Announce Definitive Merger Agreement, Government-mandated incremental COVID-19 pandemic related pay, Combined Plan and UFCW National Fund withdrawal, https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Do Not Sell or Share My Personal Information. 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. 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. Kroger and Albertsons merger: What lies ahead? Turn on desktop notifications for breaking stories about interest? Kroger and Albertsons Companies Announce Definitive Merger Agreement October 14, 2022 Establishes National Footprint to Serve America with Fresh, Affordable Food for Everyone Combines Two Companies with Shared Values to Unite Around Kroger's Purpose to Feed the Human Spirit 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). 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. Loblaw's T&T Supermarkets maps out expansion | Supermarket News The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. 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. Kroger and Albertsons Companies are unable to provide a full reconciliation of the non-GAAP measures used in the forward-looking measures without unreasonable effort because it is not possible to predict with a reasonable degree of certainty the information necessary to calculate such measures on a GAAP basis because such information is dependent on future events that may be outside of Kroger's and Albertsons Companies' control. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. 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. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. Still, to each their own. 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. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. Albertsons shareholders expect to receive $34.10 per share. 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. 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. 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 combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. Kroger and Albertsons together in fiscal 21 racked up $210 billion in revenue and $3.3 billion in net earnings, according to Supermarket News. 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 grocery chain Kroger announced plans Friday to buy competitor Albertsons for $24.6 billion, potentially creating a grocery empire spanning the United States. Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. We look forward to working together with Kroger to capture the compelling opportunities ahead. If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. 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. 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. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. Is my store going to be one that closes? 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. Additional Information About Albertsons Companies and Where to Find It. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Kroger buys Albertsons in massive supermarket merger, what it means for 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. As a subscriber, you have 10 gift articles to give each month. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet 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. 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. 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. Most recently, T&T opened a 40,000-square-foot store at the Willowbrook Shopping Centre in Langley, B.C. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. 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 combined company's innovation capabilities, increased manufacturing footprint and expanded national reach will drive improved quality and efficiency allowing its Our Brands portfolio to accelerate growth and profitability while remaining affordable and accessible to customers. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. Adding or increasing robotics like Ocado customer fulfillment centers could help grow margins, not just critical mass, according to Fenyo. The cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately $6.85 per share. The combined new Kroger is expected to divest 100 to. "The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. T&T Supermarkets. Arun Sundaram of CFRA Research expects Albertsons to divest 100 to 375 overlapping store locations. How big beyond store count will the new multi-billion-dollar company be in this food fight? 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. At a time when consumers are already withering under high food prices, consumer advocates argue that the deal would wipe out any meaningful competition in numerous cities and communities and ultimately lead to consumers paying more. 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. This is a BETA experience. 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. 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 say their merger, which they expect to complete in 2024, will help them compete against larger chains and benefit shoppers, workers and local communities. 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." Anyone can read what you share. We may see mega-mergers create superpowers in the supermarket sector. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. 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. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business.