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. 24/7 coverage of breaking news and live events. 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. According to the Coresight. Albertsons was even able to buy back several of the stores . 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. We are committed to creating #ZeroHungerZeroWaste communities by 2025. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. 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. 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. 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. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. ", "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. Many of these stores operate in small-town markets and belong to families that manage them. See the Appendix for a reconciliation of historical non-GAAP measures. 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. 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. Getting out has proved much more difficult. Kroger will also build on its recent investments in associate wages, training and benefits. As a subscriber, you have 10 gift articles to give each month. 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. The higher profits allowed Albertsons to pay its shareholders nearly $500 million in dividends over the past three years. 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. are planning a merger that would create a superstore second in scale only to Walmart That is especially true of supermarket giant Kroger 's proposed purchase of rival Albertsons. For most buyout funds, the hope is to fix or improve the company and make profits in a public offering or by selling the company to another buyer within four to seven years. The CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. 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. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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. Mar 02, 2023. We may see mega-mergers create superpowers in the supermarket sector. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. 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.. The deal, if approved by the Federal Trade Commission, would create a. 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. 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. 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. That means the top three grocers would control more than half of the sector. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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). 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. 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. 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. 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. T&T Supermarkets. 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. Publix is a huge player in the South, and Grocery Outlet is big in the West. Albertsons said it would immediately begin the process of paying the special dividend. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. 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." An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. ACI "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. An on-demand replay of the webcast will be available at approximately 1:00 p.m. Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. How big beyond store count will the new multi-billion-dollar company be in this food fight? About a year later, more stores were added when the group contributed $1.25 billion to acquire more than 1,300 stores from Safeway. 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. 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. This cash dividend is expected to be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. Kroger 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. Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located near other stores and could be considered redundant if the chains . ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. 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. 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 combined company will drive profitable growth and sustainable value for all stakeholders. 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. three companies, which together would represent more than half of the sector by revenue. 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. ", Accelerates Kroger's Go-to-Market Strategy. 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. 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. Also includes expenses related to management fees paid in prior fiscal years in connection with acquisition and financing activities.5Represents incremental pay that is legislatively required in certain municipalities in which Albertsons operates.6Related to the Combined Plan during the fourth quarter of fiscal 2021.7Miscellaneous adjustments include non-cash lease-related adjustments, lease and lease-related costs for surplus and closed stores, net realized and unrealized gain on non-operating investments, certain legal and regulatory accruals and settlements, net and other (primarily includes adjustments for pension settlement gain, unconsolidated equity investments and certain contract terminations). Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. To learn more about us, visit our newsroom and investor relations site. "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. 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. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 8:30 a.m. 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. 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. 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. 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 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. After a scramble to look for alternatives, another buyer was found. The companies said they plan to continue with their shared track record to lower prices, enhance customer experience and increase associate wages and benefits. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. Send any friend a story 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. 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. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. This deal would put all these brands in one basket. Sarah A. Miller/Idaho Statesman, via Associated Press. 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. 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. Walmart already controls 25 percent, or 30 percent including Sams Club. or Walmart, which control only a few brands. Smaller and bigger stores both can have a lot to offer. Opinions expressed by Forbes Contributors are their own. Mitchell said the new entity would have more clout in dealing with farmers, food workers and local grocers. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. This included Cerberus, a private equity firm that is a major shareholder in Albertsons and stands to see substantial payouts through dividends and even more substantial payouts if the merger eventually goes through. Kroger could leverage Albertsons successful digital strategy investments to help implement similar initiatives for their own online services, according to Numerator.com. 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. 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. Still, the investors sold $800 million worth of shares, andanother $1.7 billion was raised from some hedge funds and used to do a share buyback. 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. Watch out, Walmart? CFA 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 rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. 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. 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. 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. 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. The Cincinnati-based company is the second-largest grocer by market share in the United States, behind. But for Albertsons, the pandemic significantly changed its fortunes. A reconciliation to historical non-GAAP figures is provided in the Appendix below. A lot, actually. "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. 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. News > . According to Numerator.com, Albertsons has been growing e-commerce sales rapidly with more households shopping online and using its successful click & collect strategy.. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. 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. 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 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. 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. Albertsons profits rose during the pandemic to $1.6 billion in 2021 from $466 million in 2019. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. Is my store going to be one that closes? Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. . Pro Forma Adjusted Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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. Still, to each their own. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Baked goods at a Kroger. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. WMT Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. We could see a big data, high-tech boom fueled by deep pockets.
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