Is my livelihood going to go away? asked Kyong Barry, 60, a front-end manager at a Safeway in Auburn, Wash. She is a member of the United Food and Commercial Workers International Union, which has 350,000 members working in stores owned by Kroger and Albertsons. Consumer advocates, unions and independent grocers are against a deal that would join Kroger and Albertsons, and be lucrative for investors. Albertsons-Kroger Deal Spooks Merger Pros - WSJ Many of these stores operate in small-town markets and belong to families that manage them. But for Albertsons, the pandemic significantly changed its fortunes. 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. At closing, the Company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing. It also could mean a stronger second nipping at the heels of Walmart. The decision clears the way for Albertsons to pay its shareholders a $4 billion dividend. 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. Kroger and Albertsons merger: What lies ahead? 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. Dozens of Oregon grocery stores owned by Kroger Co. (Fred Meyer and QFC) and Albertsons Cos. (Albertsons and Safeway) are located near other stores and could be considered redundant if the chains . ", 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. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. 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. This press release contains certain statements that constitute "forward-looking statements" within the meaning of federal securities laws, including statements regarding the effects of the proposed transaction. Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. 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 and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. Following the close of the transaction, Rodney McMullen will continue to serve as Chairman and Chief Executive Officer and Gary Millerchip will continue to serve as Chief Financial Officer of the combined company. Mar 02, 2023. Grocery Giants Kroger and Albertsons Are Said to Be in Merger Talks 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.". Pro Forma Adjusted Kroger has invested an incremental $1.2 billion in associate compensation and benefits since 2018. ", The newly merged company said it "expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.". "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. Later, an attempt in 2018 to cash out of the investment fell through when a proposed reverse merger with Rite Aid was scuttled after the drugstore chains shareholders opposed it. Still, the investors sold $800 million worth of shares, andanother $1.7 billion was raised from some hedge funds and used to do a share buyback. If a merger does . 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. In addition to company stores, Albertsons operates Safeway, Vons, Jewel-Osco, Shaws, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balduccis Food Lovers Market. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders. "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," the company stated in its news release. Kroger initially said after the Albertsons deal was finalized Oct. 13, 2022, it expected to sell somewhere between 100 and 375 stores. 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. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.". 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. 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. That could lead to some small store closings and some huge players getting even bigger. Numerator.com found that Albertsons e-commerce share nearly tripled for the 12 months ended September 30. Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. An infographic to depict the Kroger acquisition of Albertson's. In a statement, Kroger Chairman and CEO Rodney McMullen said, "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. ", "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. CFA 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. The conference call will broadcast online at ir.kroger.com. The two. Kroger/Albertsons grocery merger deserves a thorough anti-trust legal '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. We look forward to working together with Kroger to capture the compelling opportunities ahead. Albertsons digital sales grew 36 percent in the second quarter of 2022, according to Numerator.com. This cash dividend will be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. Albertsons wants to pay $4 billion to shareholders ahead of its proposed merger with Kroger, a move that would require the already debt-ridden company to borrow $1.5 billion. Kroger-Albertsons likely would close or divest of some of its own overlapping stores, possibly in response to anti-trust regulations. 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. Strengthens Kroger's Value Creation Model To Deliver Enhanced Returns. But the industrys future will depend, as always, on price, selection, convenience, location, service, and of course, customer loyalty. More mergers and less competition would mean even higher prices - and layoffs for employees.". Two major U.S. supermarkets will combine forces after a unanimous all-cash merger agreement was reached between the boards of Kroger and Albertsons. Alimentation Couche-Tard Inc. acquires Big Red Stores Albertsons profits nearly quadrupled to $1.6 billion in 2021 from $466 million in 2019. Kroger and Albertsons Cos. will provide additional detail regarding SpinCo prior to closing. That is especially true of supermarket giant Kroger 's proposed purchase of rival Albertsons. 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. Kroger will also build on its recent investments in associate wages, training and benefits. 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 Securities said that Kroger and Albertsons combined, before any store closings, would control about 19 percent of U.S. grocery market share. If the merger ultimately goes through, Kroger would control approximately 5,000 supermarkets nationwide, including Albertsons' subsidiaries such as Safeway and Ralphs. An incremental $1.3 billion will also be invested into Albertsons Cos. stores to enhance the customer experience. Numerator.com said Albertsons has been able to retain and develop habitual shopping online, with shoppers picking-up in-store through the companys Drive-Up & Go offering. So what still has to happen for the merger to be completed, as planned, in 2024? We may see mega-mergers create superpowers in the supermarket sector. The combination of the two U.S. supermarket giants could have a three-pronged effect, resulting in doom for some, gloom for others, and a boom for still others. Kroger-Albertsons merger raises fears of store closures; here's where It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. Here's a look at the number of stores Kroger and Albertsons each operate in those markets as of July 2022. Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive. 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. 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. 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. "Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. 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. ", "Utilizing Kroger's End-to-End Fresh initiative across a broader network will enable the combined company to optimize its supply chain to deliver the freshest products from field to table to more customers more quickly," the company stated. 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. 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. 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. Kroger announced plans in October to acquire Albertsons in a deal valued at $24.6 billion. Albertsons profits rose during the pandemic to $1.6 billion in 2021 from $466 million in 2019. The Albertsons/Kroger Merger Is In Jeopardy (NYSE:ACI) 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. 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). Kroger-Albertsons mega-merger could cause more US food deserts, experts ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. A reconciliation to historical non-GAAP figures is provided in the Appendix below. In Colorado, Kroger operates 148. 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 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. Kroger and Albertsons to Combine 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. Size could lead to efficiency and possibly lower prices due to bargaining power, benefiting consumers. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. 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. 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 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. See the Appendix for a reconciliation of historical non-GAAP measures. Albertsons Companies will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction referenced herein. Here's what could stop Kroger's takeover of Albertson's Combined, the stores employ more than 700,000 people across 5,000 stores. Where Kroger and Albertsons Grocery Stores Overlap ACI "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. IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. The grocery chain Kroger announced plans Friday to buy competitor Albertsons for $24.6 billion, potentially creating a grocery empire spanning the United States. 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. 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. Albertsons went public in the early months of the pandemic, but its offering was lackluster. 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. 'We're really worried': US supermarket mega-merger raises mass layoff Kroger and Albertsons together in fiscal 21 racked up $210 billion in revenue and $3.3 billion in net earnings, according to Supermarket News. Kroger-Albertsons merger: Two of the largest supermarkets in America 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. Albertsons Companies is committed to helping people across the country live better lives by making a meaningful difference, neighborhood by neighborhood.