After news of negotiations leaked out yesterday, The Kroger Co. and Albertsons Cos. today unveiled a definitive agreement to merge in a deal valued at $24.6 billion.
Under the deal, Cincinnati-based Kroger plans to acquire all outstanding shares of Albertsons common and preferred stock for about $34.10 per share. The total enterprise value of the transaction includes the assumption of roughly $4.7 billion of Albertsons’ net debt.
The deal with join the first- (Kroger) and second-largest (Albertsons) U.S. supermarket retailers, creating a national company with 4,996 stores, 66 distribution centers, 52 manufacturing plants, 2,015 fuel centers and more than 710,000 associates across 48 states and the District of Columbia. The merged entity also would be the fifth-largest retail pharmacy operator, with 3,972 pharmacy locations.
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” Kroger Chairman and CEO Rodney McMullen said in a statement. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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.
“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 [private-label] portfolio and delivering personalized value and savings,” McMullen explained. “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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.”
To help clear the way for regulatory approval of the merger, Kroger and Albertsons plan to form an Albertsons Cos. subsidiary dubbed SpinCo that would be spun off to Albertsons shareholders immediately before the transaction’s closing and operate as a stand-alone public company. Kroger and Albertsons said store divestitures are expected, and the retailers would work together to determine which locations would become part of SpinCo, as well as the entity’s pro forma capitalization.
They estimated that SpinCo would comprise 100 to 375 stores and said it 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.”
Plans call for McMullen to serve as chairman and CEO and Kroger Chief Financial Officer Gary Millerchip as CFO of the merged Kroger-Albertsons company.
Kroger and Albertsons said no further action by Albertsons Cos.’ shareholders will be needed or solicited in connection with the merger. The companies said Albertsons Cos. shareholders holding more than a majority of the retailer’s common stock have provided or committed to delivering a written consent approving the transaction no later than Oct. 18, while shareholders holding more than a majority of Albertsons’ preferred stock have already approved the transaction.
The merger transaction is slated to close in early 2024, pending regulatory approval and other customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act.
“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. 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. Today’s announcement is a testament to their success,” stated Albertsons Cos. CEO Vivek Sankaran.
“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,” Sankaran noted. “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. We look forward to working together with Kroger to capture the compelling opportunities ahead.”
*Editor’s Note: This is a breaking news story. Please check back soon for additional coverage.