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. 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. That could occur in California, Texas, Washington, D.C. and/or Phoenix, among others. EBITDA Reconciliations1. ET on October 14, 2022. 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. The potential 2024 merger between Kroger and Albertsons - Kroger agreed to purchase its competitor for almost $25 billion dollars received plenty of pushback when it was first announced. Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' common stock have either delivered a written consent or committed to delivering a written consent approving the transaction no later than October 18, 2022 and Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' preferred stock have already approved the transaction. Appendix: 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. 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. 8:30 a.m. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. 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. 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. Closings can lead to some openings for competitors, giving them room to grow. The proposed merger has drawn opposition from consumer advocates and union officials. The Kroger store in Houston and the Albertson's store in San Diego. Combining would help them scale up and compete with well-capitalized e-commerce rivals. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. "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. "This combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households with a premier omnichannel experience.". The. 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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. 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. Downtown Cincinnati-based Kroger (NYSE: KR), the nation's largest operator of traditional supermarkets, and Albertsons, agreed Oct. 13 to the $24.6 billion acquisition which comes to $34.10 per. 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. Related: U.S. Senate to put Kroger-Albertsons merger under microscope Based on fiscal 2021 data, Kroger and Albertsons combined generated about $210 billion in revenue, $3.3 billion in net . Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . 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. 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. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. While Kroger-Albertsons would be a big deal, it would be very different from either Amazon Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. 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 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 two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. 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). This deal would put all these brands in one basket. or Walmart, which control only a few brands. Dec 13, 2022. 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. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. The combined company could. There could still be some winners among smaller players who find a space to thrive. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. 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. 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. 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. ACI Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. AMZN Hy-Vee is a dominant player in the Midwest, while Wakefern is a major player in the Northeast through ShopRite, Price Rite, Fairway, and many others. Kroger and Albertsons merger: What lies ahead? 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. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. We look forward to working together with Kroger to capture the compelling opportunities ahead. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. This is a very scary time for us while they try to pay themselves $4 billion that we helped them make, she said. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. The buyout group was a step closer to a big payday last week when the Washington State Supreme Court declined to review a case brought by the state attorney general that tried to stop a dividend payment to Albertsons shareholders, arguing that it would financially weaken the company if the transaction failed. BAC The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. Net earnings attributable to The Kroger Co. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. 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. 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. An infographic to depict the Kroger acquisition of Albertson's. 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). According to Greg Ferrara of the National Grocers Association, the merger could give a single supermarket giant additional control over the nations food supply chain. This could lead to even tougher competition for smaller stores, although Kroger and Albertsons argue it could lead to better prices for consumers. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. 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. ", "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. Mar 02, 2023. But for Albertsons, the pandemic significantly changed its fortunes. Betting on the outcome of a merger or acquisition is always tricky business. 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. 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. 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 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. CINCINNATI and BOISE,Idaho, Oct. 14, 2022 /PRNewswire/ -- Kroger (NYSE: KR) and Albertsons Companies, Inc. (NYSE: ACI) today announced that they have entered into a definitive agreement under which the companies will merge two complementary organizations with iconic brands and deep roots in their local communities to establish a national footprint and unite around Kroger's Purpose to Feed the Human Spirit. The legal challenge to the dividend was the first in what is likely to be a long and arduous process for Kroger and Albertsons, and theirplanto create a behemoth with $200 billion in annual revenues and 5,000 stores across the countryoperating under well-known chains like Safeway, Ralphs and Vons. Send any friend a story News > . 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. The forward-looking statements by Kroger and Albertsons Companies included in this press release speak only as of the date the statements were made. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. Thats a lot of people relying on just a handful of companies, and it would mean a few players as huge forces. 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. Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' common stock have either delivered a written consent or committed to delivering a written consent approving the transaction no later than October 18, 2022 and Albertsons Cos. shareholders holding more than a majority of Albertsons Cos.' preferred stock have already approved the transaction. If a merger does . We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". Still, to each their own. 1 Based on combined results for each company's most recent fiscal year, respectively. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Kroger will also build on its recent investments in associate wages, training and benefits. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. Union officials have attacked the deal, saying it puts jobs at risk as antitrust regulators will probably force the sale of hundreds of grocery stores across the country. 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.

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