In any case, the chains' combined grocery market share would fall short of that of Walmart, which has stores within 10 . 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. 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. Anyone can read what you share. ", Accelerates Kroger's Go-to-Market Strategy. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. 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. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. ET. The sky-high profits also attracted a suitor. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. Watch out, Walmart? Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. More mergers and less competition would mean even higher prices - and layoffs for employees.". But the biggest winners in the $24.6 billion deal may be the private-equity giant Cerberus and a group of investors. The deal, if approved by the Federal Trade Commission, would create a. 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 companies have said regulatory approval for the complicatedtransactionwont happen until early next year and may require the sale or spinoff of hundreds of grocery stores. 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. Kroger and Albertsons merger: What lies ahead? 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. 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). Additional Information About Albertsons Companies and Where to Find It. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. "An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. 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. 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. Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. 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. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. Is my store going to be one that closes? Closings can lead to some openings for competitors, giving them room to grow. 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. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. In 2013, the investors put up $100 million in cash and took out $3.2 billion of debt to acquire more than 800 stores from Supervalu. 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." To learn more about us, visit our newsroom and investor relations site. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. Mar 02, 2023 . 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. National Leader, Food & Beverage Services Group, Marcum. 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. That process is still under review. A lot, actually. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. 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 Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. 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 . The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. 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. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. Last month, Reuters reported that range has been narrowed. 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, SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. 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. 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. It's not just regulators that could scuttle the merger, though. Bloomberg via Getty Images, FILE|Getty Images, FILE. See the Appendix for a reconciliation of historical non-GAAP measures. 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. Baked goods at a Kroger. You may opt-out by. The financial implications of the deal are enormously complex and complicated further by Albertsons existing debt, which, per Seeking Alpha, currently exceeds $13 billion dollars. 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). ET. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. Walmart already controls 25 percent, or 30 percent including Sams Club. 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. News > . A Look Into Why The Kroger-Albertsons Merger Hasn't Happened Yet. These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? See the Appendix for a reconciliation of historical non-GAAP measures. Kroger and Albertsons Companies Announce Definitive Merger Agreement Company Release - 10/14/2022 Download the PDF versionPDF Format (opens in new window) 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 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 decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. 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. Also includes expenses related to management fees paid in prior fiscal years in connection with acquisition and financing activities.5Represents incremental pay that is legislatively required in certain municipalities in which Albertsons operates.6Related to the Combined Plan during the fourth quarter of fiscal 2021.7Miscellaneous adjustments include non-cash lease-related adjustments, lease and lease-related costs for surplus and closed stores, net realized and unrealized gain on non-operating investments, certain legal and regulatory accruals and settlements, net and other (primarily includes adjustments for pension settlement gain, unconsolidated equity investments and certain contract terminations). The deal would go beyond food to include healthcare. The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA Albertsons shareholders expect to receive $34.10 per share. 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. 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. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. 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 expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. 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. 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 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. The S in superstore could stand for synergy as well as savings for the new company. We could see a big data, high-tech boom fueled by deep pockets. 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 transaction is expected to close in early 2024, subject to required regulatory clearance and closing conditions, according to the company's investor relations site. 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. Kroger could leverage Albertsons successful digital strategy investments to help implement similar initiatives for their own online services, according to Numerator.com. An infographic to depict the Kroger acquisition of Albertson's. It also could mean a stronger second nipping at the heels of Walmart. 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. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . So what still has to happen for the merger to be completed, as planned, in 2024? 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 Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. 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. "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. Many of these stores operate in small-town markets and belong to families that manage them. "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 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. 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. 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. 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. An on-demand replay of the webcast will be available at approximately 1:00 p.m. Albertsons was even able to buy back several of the stores . Publix caps year of new territory with sound Q4 results . 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. The deal is likely to . Combined, the stores employ more than 700,000 people across 5,000 stores. Most recently, T&T opened a 40,000-square-foot store at the Willowbrook Shopping Centre in Langley, B.C. Kroger will also build on its recent investments in associate wages, training and benefits. Additional Information About Albertsons Companies and Where to Find It. 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. Albertsons announced the. About a year later, more stores were added when the group contributed $1.25 billion to acquire more than 1,300 stores from Safeway. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. 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 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. 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. 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. Publix is a huge player in the South, and Grocery Outlet is big in the West. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. Coresights report on regional consolidation of grocery chains showed that from 2015 to 2020 M&A grew national giants market share as they gobbled up midsize regional competitors and otherwise expanded. As grocery chains struggled to compete against the big-box behemoths, consolidation happened and private-equity firms moved in, sometimes with disastrous results. 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. 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.