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This deal would put all these brands in one basket. Two major U.S. supermarkets will combine forces after a unanimous all-cash merger agreement was reached between the boards of Kroger and Albertsons. Turn on desktop notifications for breaking stories about interest? 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. So what still has to happen for the merger to be completed, as planned, in 2024? As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. 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 . 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 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. ET Today, October 14, 2022. 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. 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. Kroger has engaged with the rating agencies and is strongly committed to an investment grade credit rating. The new entity would mean some competitors stores might close, as more local grocers are driven out of business, Mitchell said. Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. "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. 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. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. "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. 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. CFA "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. We may see mega-mergers create superpowers in the supermarket sector. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. The rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. 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. 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. three companies, which together would represent more than half of the sector by revenue. Krogers $24.6 billion merger with Albertsons could be a year away from gaining regulatory clearance. The combined company will drive profitable growth and sustainable value for all stakeholders. Mar 02, 2023. When completed, the information statement will be mailed to Albertsons Companies' stockholders. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. 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. 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.". Baked goods at a Kroger. Digital boom helps Kroger in Q4, FY 2022 . Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. 8:30 a.m. WMT View original content to download multimedia:https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Kroger and Albertsons Companies Announce Definitive Merger Agreement, Government-mandated incremental COVID-19 pandemic related pay, Combined Plan and UFCW National Fund withdrawal, https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Do Not Sell or Share My Personal Information. Citi and Wells Fargo Securities, LLC are serving as financial advisors and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel to Kroger. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood. 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. 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. A Kroger-Albertsons merger would spark a fresh wave of mergers and acquisitions as companies seek to keep up, analysts predict. ", 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. Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. Citi and Wells Fargo Securities, LLC are serving as financial advisors and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal counsel to Kroger. Smaller and bigger stores both can have a lot to offer. 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 Albertsons was even able to buy back several of the stores . 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 cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately $6.85 per share. In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. 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. 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. Combined, the stores employ more than 700,000 people across 5,000 stores. 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, '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 company said it also hopes to continue its shared progress towards environmental, social and governance (ESG) principles. We look forward to working together with Kroger to capture the compelling opportunities ahead. 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. 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. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. "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. In a move to reshape the U.S. supermarket landscape, Kroger and Albertsons Cos. The US's two biggest grocery store chainsannounced plans to join forces in mid-October. Kroger expects to continue to have a solid balance sheet supported by strong free cash flow of the combined business. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. Watch out, Walmart? 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. Kroger and Albertsons merger: What lies ahead? 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. 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. 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. 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. 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. 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 has engaged with the rating agencies and is strongly committed to an investment grade credit rating. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. 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. 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. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo.