The conference call will broadcast online at ir.kroger.com. 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. 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. AMZN 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, Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research. As part of the $9 billion deal, Albertsons sold the stores to a smaller grocery chain, Haggen, which previously had less than 20 stores. "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. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. The combined new Kroger is expected to divest 100 to. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. 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. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. 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. 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. While Kroger-Albertsons would be a big deal, it would be very different from either Amazon Ever since the pending megamerger between Kroger and Albertsons, the two largest grocery store chains in the country, was announced in October, the companies have argued that the marriage will be good for consumers, employees and communities. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. 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. 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. Mar 02, 2023. In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million. 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. Most recently, T&T opened a 40,000-square-foot store at the Willowbrook Shopping Centre in Langley, B.C. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. 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. But the Albertsons shareholders have been hanging on to this company, or its predecessor, for almost 17 years, and thats a very long holding period for private equity firms. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. 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. But for Albertsons, the pandemic significantly changed its fortunes. Kroger initially said after the Albertsons deal was finalized Oct. 13, 2022, it expected to sell somewhere between 100 and 375 stores. 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 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. Kroger and Albertsons merger: What lies ahead? While the post-merger company agreed to sell off 146 stores to Haggen Food and Pharmacy as a part of their 9 billion dollar merger agreement, just 9 months later Haggen Food and Pharmacy filed for bankruptcy, failing to find success in an a market dominated by grocery conglomerates. 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. 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. Steven Peterson. Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. 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 and Albertsons could sell or close stores if their $20 billion merger is approved . "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. Still, to each their own. There could be another bright side for smaller players facing big competitors. The. Under the terms of the merger agreement, which has been unanimously approved by the board of directors of each company, Kroger will acquire all of the outstanding shares of Albertsons Companies, Inc. ("Albertsons Cos.") common and preferred stock (on an as converted basis) for an estimated total consideration of $34.10 per share, implying a total enterprise value of approximately $24.6 billion, including the assumption of approximately $4.7 billion of Albertsons Cos. net debt. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. CFA The deal would go beyond food to include healthcare. 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. 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. 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. 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. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". 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. 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. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. Michael Needler Jr., who runs Fresh Encounter, a chain of 98 grocery stores, referred to the water-bed effect of giants like Albertsons and Kroger. When the large power buyers demand full orders, on time and at the lowest cost, it effectively causes the water-bed effect, said Michael Needler Jr., the president and chief executive of Fresh Encounter, a chain of 98 grocery stores based in Findlay, Ohio. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. 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. Walmart already controls 25 percent, or 30 percent including Sams Club. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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." There could still be some winners among smaller players who find a space to thrive. Last month, Reuters reported that range has been narrowed. 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. Many of these stores operate in small-town markets and belong to families that manage them. 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). 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. Research. How big beyond store count will the new multi-billion-dollar company be in this food fight? Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. 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." 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. Kroger Watch out, Walmart? IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. 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. But as the potential buyer was going through due diligence and shortly after Albertsons financial advisers raised the idea of a multi-billion-dollar dividend payout to shareholders, the buyer walked away. 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. The proposed merger has drawn opposition from consumer advocates and union officials. Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. But that value will decrease by $6.85 a share when the $4 billion dividend to all shareholders is paid and could decline further if, in order to receive regulatory approval, hundreds of stores are placed in a new company that would be owned by Albertsons shareholders, including the private-equity firms. 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. That process is still under review. Although Kroger and Albertson's are the largest grocery-only companies in the country, they are falling behind in online, the key change happening to the industry. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. Appendix: 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. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. WMT Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. Later, an attempt in 2018 to cash out of the investment fell through when a proposed reverse merger with Rite Aid was scuttled after the drugstore chains shareholders opposed it. Krogers partnership with the Ocado Group has already led to about 20 automated customer fulfillment centers and other facilities, while Albertsons has focused on Instacart, DoorDash, and Uber Eats, according to Supermarket News. Costco controls another 9 percent. 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.. Corporate buyout specialists generally raise money from big investors, like pension funds for state employees, teachers, police officers and firefighters, and then buy undervalued or underappreciated companies. 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 combined company could. It's not just regulators that could scuttle the merger, though. If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. "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.". Albertsons announced the. Bloomberg via Getty Images, FILE|Getty Images, FILE. Albertsons Companies is a leading food and drug retailer in the United States. We are committed to creating #ZeroHungerZeroWaste communities by 2025. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. An infographic to depict the Kroger acquisition of Albertson's. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. 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. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. 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. More mergers and less competition would mean even higher prices - and layoffs for employees.". Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. Mar 02, 2023 . The deal, if approved by the Federal Trade Commission, would create a. The sky-high profits also attracted a suitor. Additional Information About Albertsons Companies and Where to Find It. 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. 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. 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. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. 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. That is on top of the $1.5 billion in profits theyve already made and the $3 billion from their share of the dividend when it is paid. The combined company will drive profitable growth and sustainable value for all stakeholders. 8:30 a.m. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. 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. "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. ET on October 14, 2022. Kroger will also build on its recent investments in associate wages, training and benefits. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. Publix caps year of new territory with sound Q4 results . A lot, actually. 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. 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. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. Pro Forma Adjusted A customer shops in a Kroger grocery store on July 15, 2022 in Houston. 24/7 coverage of breaking news and live events. Albertsons shareholders expect to receive $34.10 per share. 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. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. 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. 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. 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. Appendix: 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. In Colorado, Kroger operates 148. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. 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, The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. T&T Supermarkets. Turn on desktop notifications for breaking stories about interest? Albertsons said it would immediately begin the process of paying the special dividend. 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. Digital boom helps Kroger in Q4, FY 2022 . 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. Reuters reported last month that the Federal Trade Commission had asked Kroger to supply more information about the proposed merger. 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. Albertsons went public in the early months of the pandemic, but its offering was lackluster. 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. Watch out Walgreens? 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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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. They push down, and the consumer packaged goods companies have no option but to supply them at their demands, leaving rural stores with higher costs and less availability to products.. It was founded in the United States as the Independent Grocers Alliance in 1926. Mitchell said the new entity would have more clout in dealing with farmers, food workers and local grocers. 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. 1 Based on combined results for each company's most recent fiscal year, respectively. 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. We look forward to working together with Kroger to capture the compelling opportunities ahead. Kroger will also build on its recent investments in associate wages, training and benefits. Two major U.S. supermarkets will combine forces after a unanimous all-cash merger agreement was reached between the boards of Kroger and Albertsons. 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. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? As a subscriber, you have 10 gift articles to give each month. 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. 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. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. Kroger and Albertsons merger: What lies ahead? Arun Sundaram of CFRA Research expects Albertsons to divest 100 to 375 overlapping store locations.