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. 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. As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. The deal,. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. Albertsons said it would immediately begin the process of paying the special dividend. 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. 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. 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. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. Getting out has proved much more difficult. 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. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. The companies said they plan to continue with their shared track record to lower prices, enhance customer experience and increase associate wages and benefits. But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. 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. 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. or Walmart, which control only a few brands. News > . Albertsons shareholders expect to receive $34.10 per share. Krogers $24.6 billion merger with Albertsons could be a year away from gaining regulatory clearance. As part of the $9 billion deal, Albertsons sold the stores to a smaller grocery chain, Haggen, which previously had less than 20 stores. The deal, if approved by the Federal Trade Commission, would create a. The worlds biggest retailer may be looking over its shoulder soon. Appendix: 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. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. 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. Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. In 2017, when Albertsons turned a small profit, the investment firms paid themselves a cash distribution of $250 million. How big beyond store count will the new multi-billion-dollar company be in this food fight? 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. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. Combining would help them scale up and compete with well-capitalized e-commerce rivals. The combined company will drive profitable growth and sustainable value for all stakeholders. For the private-equity giant Cerberus, which was co-founded by the billionaire Stephen Feinberg and oversees $60 billion in assets, getting into the grocery business was relatively easy. 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. The. Smaller and bigger stores both can have a lot to offer. 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. A lot, actually. ET. 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 buyout group, which owns 73 percent of the company, will receive the biggest share of the dividend, or $3 billion, of which $2.5 billion will come from cash and about $1.5 billion will be borrowed and put on Albertsons balance sheet. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. CFA The sky-high profits also attracted a suitor. 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. 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, We are committed to creating #ZeroHungerZeroWaste communities by 2025. Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. Betting on the outcome of a merger or acquisition is always tricky business. Pro Forma Adjusted 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. 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. As a subscriber, you have 10 gift articles to give each month. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. It's not just regulators that could scuttle the merger, though. 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). As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. 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. 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. 8:30 a.m. 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. 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. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. 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. 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. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. Send any friend a story 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 Companies is a leading food and drug retailer in the United States. Steven Peterson. "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. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. 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). A customer shops in a Kroger grocery store on July 15, 2022 in Houston. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. I believe this merger is the beginning of a trend and that we could see more consolidation, according to Ken Fenyo, of Coresight Research. 1 Based on combined results for each company's most recent fiscal year, respectively. "We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders," said Rodney McMullen, Kroger Chairman and Chief Executive Officer, who will continue serving as Chairman and CEO of the combined company. 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). Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. 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. 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 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. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. ET Today, October 14, 2022. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. The deal would go beyond food to include healthcare. 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. Do Not Sell or Share My Personal Information. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. The combined company will drive profitable growth and sustainable value for all stakeholders. "The outrage over the payout and the deal is overblown: Albertsons and Kroger are in an industry with razor-thin margins. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. 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. 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. 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. Additional Information About Albertsons Companies and Where to Find It. Dec 13, 2022. Appendix: 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. 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. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. This deal would put all these brands in one basket. 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, Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. 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. ", "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. National Leader, Food & Beverage Services Group, Marcum. Baked goods at a Kroger. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . 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. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. The deal could create "a more formidable. 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. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. The two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. 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. "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. are planning a merger that would create a superstore second in scale only to Walmart That process is still under review. Is my store going to be one that closes? WMT 1Pro forma results presented in this presentation represent the combined Kroger and Albertsons 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.2Transformation costs primarily include costs related to store and business closure costs and third party professional consulting fees associated with business transformation and cost saving initiatives.3Includes costs related to closures of operating facilities and third-party consulting fees related to strategic priorities and associated business transformation.4Related to conversion activities and related costs associated with integrating acquired businesses. 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 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. 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. Albertsons profits rose during the pandemic to $1.6 billion in 2021 from $466 million in 2019. Albertsons announced the. 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. ET Today, October 14, 2022. 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. 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. AMZN The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. The combination of the two U.S. supermarket giants could have a three-pronged effect, resulting in doom for some, gloom for others, and a boom for still others. We are committed to creating #ZeroHungerZeroWaste communities by 2025. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. '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. 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. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". three companies, which together would represent more than half of the sector by revenue. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. See the Appendix for a reconciliation of historical non-GAAP measures. 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. Albertsons Companies is a leading food and drug retailer in the United States. The retailers hope. ", "Utilizing Kroger's End-to-End Fresh initiative across a broader network will enable the combined company to optimize its supply chain to deliver the freshest products from field to table to more customers more quickly," the company stated. The deal is likely to . 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. 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. Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. 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 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. 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. 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. 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. "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, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. More mergers and less competition would mean even higher prices - and layoffs for employees.". 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. 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.