Kroger will also build on its recent investments in associate wages, training and benefits. 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. 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 and Albertsons together in fiscal 21 racked up $210 billion in revenue and $3.3 billion in net earnings, according to Supermarket News. Kroger 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 conference call will broadcast online at ir.kroger.com. 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. More mergers and less competition would mean even higher prices - and layoffs for employees.". Albertsons said in a statement that it had grown tremendously with the help of our sponsors and other investors. It added that it had spent billions of dollars to modernize its stores and build digital and technology platforms, as well as to improve associate wages, benefits and training programs. Kroger and Albertsons Cos. have agreed to work together to determine which stores would comprise SpinCo, as well as the pro forma capitalization of SpinCo. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. 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.. The company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. Albertsons shareholders expect to receive $34.10 per share. 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. News > . 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 will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.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.". The S in superstore could stand for synergy as well as savings for the new company. An on-demand replay of the webcast will be available at approximately 1:00 p.m. While Kroger-Albertsons would be a big deal, it would be very different from either Amazon If a merger does . 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. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. Mar 02, 2023. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results. 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. 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. 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. 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. 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. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. 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. ", "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. 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 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. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. 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. Pro Forma Adjusted But some believe scale could lead to backlash, as some customers adopt a small-is-beautiful approach, believing smaller stores are closer to the customer. EBITDA Reconciliations1. For the past 15 of her 20 years working at the grocery store, Ms. Barry said, she had perfect attendance before a bout of Covid-19 just before Thanksgiving forced her to call out sick. 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. 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. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. They have already made big profits in their long-term investment in Albertsons and hope to make billions of dollars more through the merger. 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. For most buyout funds, the hope is to fix or improve the company and make profits in a public offering or by selling the company to another buyer within four to seven years. In October, Kroger . 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. 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. 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. An infographic to depict the Kroger acquisition of Albertson's. 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 AMZN We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". National Leader, Food & Beverage Services Group, Marcum. Digital boom helps Kroger in Q4, FY 2022 . "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. 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. 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 a track record of successful integrations that combine the strengths of each company while maintaining and enhancing each organizations' distinctive banners and storied histories. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. Kroger and Albertsons have extensive store overlap in Washington and other markets and are expected to spin off hundreds of stores to satisfy antitrust concerns. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. Send any friend a story 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. To learn more about us, visit our newsroom and investor relations site. ET on October 14, 2022. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. Kroger and Albertsons, which is based in Boise, Idaho, said Friday that they expected to close the deal in early 2024, and that Kroger would pay Albertsons $600 million if the merger fell apart . That could lead to some small store closings and some huge players getting even bigger. 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. 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." At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. 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 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 powerful union is worried about lost jobs for their members in the event regulators mandate the sale of hundreds of supermarkets. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. An on-demand replay of the webcast will be available at approximately 1:00 p.m. IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. Albertsons Companies is a leading food and drug retailer in the United States. 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. A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. Net earnings attributable to The Kroger Co. 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. That process is still under review. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. 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. 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 unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. 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. 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. Is my store going to be one that closes? 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. Mar 02, 2023 . Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. Another huge grocery retailer could put more pressure on smaller players and change the balance of power in working with suppliers. 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. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. 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. So what still has to happen for the merger to be completed, as planned, in 2024? 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. 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 deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. Combining would help them scale up and compete with well-capitalized e-commerce rivals. 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. Turn on desktop notifications for breaking stories about interest? 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. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. "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. 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 . We could see a big data, high-tech boom fueled by deep pockets. ", Additionally, Kroger said it expects this deal will enable the company to "serve America with fresher food, faster" with its "expanded network of stores and distribution centers, as well as a broader supplier base. Pro Forma Adjusted Additional Information About Albertsons Companies and Where to Find It. Adding or increasing robotics like Ocado customer fulfillment centers could help grow margins, not just critical mass, according to Fenyo. In addition to stores with the company name, Kroger controls Ralphs, Dillons, Smiths, King Soopers, Frys, QFC, City Market, Owens, Jay C, Pay Less, Bakers, Gerbes, Harris Teeter, Pick N Save, Metro Market, Marianos, Fred Meyer, Food 4 Less and Foods Co. '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. The CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. That is especially true of supermarket giant Kroger 's proposed purchase of rival Albertsons. 8:30 a.m. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. Arun Sundaram of CFRA Research expects Albertsons to divest 100 to 375 overlapping store locations. Mitchell said the new entity would have more clout in dealing with farmers, food workers and local grocers. 1 Based on combined results for each company's most recent fiscal year, respectively. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. 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. 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. ACI 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). 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. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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 Opinions expressed by Forbes Contributors are their own. The two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . 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 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. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. 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. 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. "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," the company stated in its news release. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. The Kroger-Albertsons mega-merger could redraw the national map in terms of market share and other ways as consolidation continues. 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. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. 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. Robert Ohmes of Bank of America Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? 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.