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. That could lead to some small store closings and some huge players getting even bigger. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. An infographic to depict the Kroger acquisition of Albertson's. It was founded in the United States as the Independent Grocers Alliance in 1926. and Albertsons Crain's reporter Ally Marotti and host Amy Guth discuss why Chicago's packaged-foods giants should be concerned about the proposed Kroger-Albertsons merger, and they talk about the challenges and . An on-demand replay of the webcast will be available at approximately 1:00 p.m. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. 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. Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' common stock have either delivered a written consent or committed to delivering a written consent approving the transaction no later than October 18, 2022 and Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' preferred stock have already approved the transaction. Albertsons announced it would pay shareholders about $4bn in special dividends as part of the merger agreement, which would see Kroger spending $24.6bn to acquire Albertsons, with. Albertsons announced the. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. 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 is a BETA experience. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. 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. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. The combined company could. 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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. 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 Companies is a leading food and drug retailer in the United States. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. Citi and Wells Fargo Securities, LLC are serving as financial advisors and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel to Kroger. But 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. 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. Kroger has already paused its share repurchase program to prioritize de-leveraging following the merger to achieve its net leverage target of 2.5x EBITDA in the first 18 24 months post close. Additional Information About Albertsons Companies and Where to Find It. 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). 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. 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. Sarah A. Miller/Idaho Statesman, via Associated Press. 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. A reconciliation to historical non-GAAP figures is provided in the Appendix below. Albertsons was even able to buy back several of the stores . 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. 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 and Albertsons Cos. have strong track records of providing quality products at great value. After a scramble to look for alternatives, another buyer was found. 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. "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. 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. A reconciliation to historical non-GAAP figures is provided in the Appendix below. But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. We'll also be able to further enhance technology and innovation, promote healthier lifestyles, extend our health care and pharmacy network and grow our alternative profit businesses. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. Mergers like this could accelerate the use of technology such as big data and e-commerce in the F&B industry, feeding into an online sales boom. Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. 1 Based on combined results for each company's most recent fiscal year, respectively. 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. 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. Combined, the stores employ more than 700,000 people across 5,000 stores. 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, Albertsons Companies is a leading food and drug retailer in the United States. 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. 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. Publix is a huge player in the South, and Grocery Outlet is big in the West. Associated presentation materials and an infographic regarding the transaction will be available on the investor relations section of each company's website as well as a joint transaction website www.KrogerAlbertsons.com. 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. AMZN The buyout group was a step closer to a big payday last week when the Washington State Supreme Court declined to review a case brought by the state attorney general that tried to stop a dividend payment to Albertsons shareholders, arguing that it would financially weaken the company if the transaction failed. 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 also includes certain forward-looking non-GAAP financial measures, which Kroger and Albertsons Companies management believe to be useful to investors and analysts. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. 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. Still, to each their own. . are planning a merger that would create a superstore second in scale only to Walmart Mar 02, 2023. 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. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. 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. Kroger will also build on its recent investments in associate wages, training and benefits. 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. 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. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. "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 grocery store chains and investment firms involved insist the deal isnt about a payday for investors. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. 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. 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. The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. Washington Analysis, a research firm in Washington, D.C., that focuses on political and regulatory policy, put the odds of the merger successfully closing at 35 percent. ", "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. 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. 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. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results. 24/7 coverage of breaking news and live events. 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. That could occur in California, Texas, Washington, D.C. and/or Phoenix, among others. The conference call will broadcast online at ir.kroger.com. 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. It also could mean a stronger second nipping at the heels of Walmart. The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. The 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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. 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. Digital boom helps Kroger in Q4, FY 2022 . 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. Last fall, Kroger announced it agreed to purchase Albertsons in a $24.6 billion supermarket merger a move that would have nationwide impacts on consumers. Is my store going to be one that closes? ACI 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. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. 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. 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. 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. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. Pro Forma Adjusted It's not just regulators that could scuttle the merger, though. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. T&T Supermarkets. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. 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. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. The Kroger-Albertsons mega-merger would create a company with about 5,000 U.S. stores, a close second to Walmart's 5,335 in the United States. 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. Walmart already controls 25 percent, or 30 percent including Sams Club. 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. Chicago Other (552) Meijer (32) Kroger (60) Walmart (67) Aldi (157) Albertsons (179) 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, IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. It could mean thinner margins for smaller, independent stores and some suppliers; more competition for larger players, and a possible boom for consolidation in the future. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. ET on October 14, 2022. 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. Appendix: 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. A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. There could still be some winners among smaller players who find a space to thrive. The. Unlike the chain store business model, IGA operates as a franchise through stores that are owned separately from the brand. 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. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. 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. In October, Kroger . These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. 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.