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. Kroger-Albertsons Merger Faces Long Road Before Approval Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for. 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. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. The combined company's innovation capabilities, increased manufacturing footprint and expanded national reach will drive improved quality and efficiency allowing its Our Brands portfolio to accelerate growth and profitability while remaining affordable and accessible to customers. According to Numerator.com, Albertsons has been growing e-commerce sales rapidly with more households shopping online and using its successful click & collect strategy.. . In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. BAC 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. These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. Kroger and Albertsons merger: What lies ahead? Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. Today's announcement is a testament to their success," said Vivek Sankaran, CEO of Albertsons Cos. "At Albertsons Cos., we are guided by an ambition to create customers for life. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. 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. It's not just regulators that could scuttle the merger, though. 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. 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. 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. 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. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Pro Forma Adjusted 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. So what still has to happen for the merger to be completed, as planned, in 2024? Consumer advocates speculated that the merging of the two supermarket giants would lead to increased prices in a time of already rampant food inflation, and democratic party senators Bernie Sanders and Elizabeth Warren both publicly backed the blocking of the acquisition by federal regulators, according to CNN Business. View original content to download multimedia:https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html, Sign Up to Receive the Latest Kroger News and Releases, Kroger and Albertsons Companies Announce Definitive Merger Agreement, Government-mandated incremental COVID-19 pandemic related pay, Combined Plan and UFCW National Fund withdrawal, Information Concerning the Board of Directors, https://www.prnewswire.com/news-releases/kroger-and-albertsons-companies-announce-definitive-merger-agreement-301649531.html. Do Not Sell or Share My Personal Information. It should come as no surprise, then, that a Washington D.C.-based research company well-versed in these sorts of mergers gives this one only a 35% chance of actually happening, per The New York Times. It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. Is my store going to be one that closes? ET. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. That means the top three grocers would control more than half of the sector. 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. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. 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. AMZN "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. 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." 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. 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. Costco controls another 9 percent. KR 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 rest of the $9 billion purchase of the Safeway stores was financed with debt, pushing Albertsons total debt to more than $12 billion. Other complicating factors include possible legal actions and the fact that the two supermarket chains are largely unionized, per CNN. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. Many of these stores operate in small-town markets and belong to families that manage them. 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 combined company will drive profitable growth and sustainable value for all stakeholders. 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." Additional Information About Albertsons Companies and Where to Find It. "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. 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. 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.". The Kroger-Albertsons mega-merger could redraw the national map in terms of market share and other ways as consolidation continues. 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. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. The S in superstore could stand for synergy as well as savings for the new company. He has advised domestic and foreign clients in the tax-efficient structuring of legal entities, effective tax rate planning, mergers and acquisitions, corporate reorganizations, treasury. We may see mega-mergers create superpowers in the supermarket sector. ", "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. Betting on the outcome of a merger or acquisition is always tricky business. The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. 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. We are committed to creating #ZeroHungerZeroWaste communities by 2025. 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. Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. "This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . There could still be some winners among smaller players who find a space to thrive. 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). Watch out Walgreens? Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. I believe this merger is the beginning of a trend and that we could see more consolidation, according to Ken Fenyo, of Coresight Research. A lot, actually. One potential legal hurdle was recently cleared when the state of Washington's Supreme Court refused to hear a case that could have blocked $4 billion in dividend payouts to those with stock shares in Albertsons, The New York Times reported. Combining would help them scale up and compete with well-capitalized e-commerce rivals. "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. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. 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. 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.. For the buyout firms and other investors, which had about $2 billion invested in total in the various grocery store acquisitions, their 73 percent stake in Albertsons would be valued at more than $9 billion. 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). These statements are based on the assumptions and beliefs of Kroger and Albertsons Companies management in light of the information currently available to them. 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. The combined new Kroger is expected to divest 100 to. No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. To learn more about us, visit our newsroom and investor relations site. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". Still, to each their own. Albertsons was even able to buy back several of the stores . 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. ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. An on-demand replay of the webcast will be available at approximately 1:00 p.m. Neither Kroger nor Albertsons Companies assumes the obligation to update the information contained herein unless required by applicable law. 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 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. 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. Watch out, Walmart? 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. 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.