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Kroger and Albertsons each already control multiple retail brands, creating the illusion of a large number of independent players. The unavailable information could have a significant impact on Kroger's and Albertsons Companies' GAAP financial results. Walmart already controls 25 percent, or 30 percent including Sams Club. 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 cash dividend is expected to be payable on November 7, 2022, to shareholders of record as of the close of business on October 24, 2022. Pro Forma Adjusted 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. The merger is also still being challenged by union leaders from the United Food and Commercial Workers, notes Seeking Alpha. The two. 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. The combined new Kroger is expected to divest 100 to. SpinCo would be spun-off to Albertsons Cos. shareholders immediately prior to merger closing and operate as a standalone public company. The two grocery store chains and investment firms involved insist the deal isnt about a payday for investors. Albertsons Companies is a leading food and drug retailer in the United States. The worlds biggest retailer may be looking over its shoulder soon. 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. That means the top three grocers would control more than half of the sector. Dec 13, 2022. 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 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. The new entity reportedly would be the fifth-largest retail pharmacy chain in the nation, with nearly 4,000 pharmacies. "Kroger and Albertsons Cos. have strong track records of providing quality products at great value. Kroger, which owns City Market, announced plans to acquire Albertsons, which owns Safeway, for nearly $25 billion last October. CFA Kroger will host a conference call to discuss the transaction tomorrow, October 14, 2022 at 8:30 a.m. 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. "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. "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. See the Appendix for a reconciliation of historical non-GAAP measures. You may opt-out by. 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. Unlike the chain store business model, IGA operates as a franchise through stores that are owned separately from the brand. ", Accelerates Kroger's Go-to-Market Strategy. 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. Kroger, the parent company of Fred Meyer, and Albertsons, parent of Carrs Safeway, announced plans to merge last month. Kroger has a track record of successful integrations that combine the strengths of each company while maintaining and enhancing each organizations' distinctive banners and storied histories. In Colorado, Kroger operates 148. This is a BETA experience. are planning a merger that would create a superstore second in scale only to Walmart Publix is a huge player in the South, and Grocery Outlet is big in the West. 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 deal could create "a more formidable. It's not just regulators that could scuttle the merger, though. 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. Mergers like this could accelerate the use of technology such as big data and e-commerce in the F&B industry, feeding into an online sales boom. WMT Kroger In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Albertsons Cos. expect to make store divestitures. Washington Analysis, a research firm in Washington, D.C., that focuses on political and regulatory policy, put the odds of the merger successfully closing at 35 percent. An on-demand replay of the webcast will be available at approximately 1:00 p.m. 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 . Anyone can read what you share. 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. I believe this merger is the beginning of a trend and that we could see more consolidation, according to Ken Fenyo, of Coresight Research. The sky-high profits also attracted a suitor. Kroger has a long track record of lowering prices, improving the customer experience and investing in its associates and communities. The purchase price represents a premium of approximately 32.8% to the unaffected closing price of Albertsons Cos. common stock on October 12, 2022, and 29.7% to the 30-day volume-weighted average price. 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. We are committed to creating #ZeroHungerZeroWaste communities by 2025. Ever since the pending megamerger between Kroger and Albertsons, the two largest grocery store chains in the country, was announced in October, the companies have argued that the marriage will be good for consumers, employees and communities. However, as The New York Times noted at the time of the initial announcement, the deal is by no means a certainty, even if it's okayed by regulators. The conference call will broadcast online at ir.kroger.com. So what does the deal mean for the F&B industry, the two companies, competitors, suppliers, and consumers? The deal could create a more formidable competitor to its largest competitor, Walmart, according to Arun Sundaram, of CFA 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. The proposed merger of Kroger and Albertsons would combine about 50 store chains under a single company. Kroger looks forward to bringing the best of Albertsons Cos.' own omnichannel capabilities to more customers to improve the shopping experience. Kroger and Albertsons could sell or close stores if their $20 billion merger is approved . According to Numerator.com, Albertsons has been growing e-commerce sales rapidly with more households shopping online and using its successful click & collect strategy.. 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. 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. But some believe scale could lead to backlash, as some customers adopt a small-is-beautiful approach, believing smaller stores are closer to the customer. Pro Forma Adjusted A customer shops inside an Albertsons Cos. grocery store in San Diego, June 22, 2020. 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. 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. 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. 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. 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. The combined company will drive profitable growth and sustainable value for all stakeholders. Please refer to the reports and filings of Kroger and Albertsons Companies with the Securities and Exchange Commission for a further discussion of the risks and uncertainties that affect them and their respective businesses. 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. 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.. As of June 18, 2022, Albertsons Companies operated 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. To maximize investment returns, the buyout firms typically leverage their cash with loans that are taken out by the company itself. 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. As consumers worked from home and ate fewer meals at restaurants, grocery store profits soared. Is my store going to be one that closes? In October, Kroger announced it would acquireAlbertsons in a complex deal that would pay all shareholders $34.10 a share. ", Accelerates Kroger's Go-to-Market Strategy. As part of the transaction, Albertsons Cos. will pay a special cash dividend of up to $4 billion to its shareholders. Mar 02, 2023. 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. 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. 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. "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. 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. The new entity would mean some competitors stores might close, as more local grocers are driven out of business, Mitchell said. ACI ", Mr. McMullen added, "This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates. The deal, if approved by the Federal Trade Commission, would create a. Additional Information About Albertsons Companies and Where to Find It. . No further action by Albertsons Cos.' shareholders will be needed or solicited in connection with the merger. It has also supported the retirement savings of individuals, universities, nonprofits and others who have entrusted us as a fiduciary.. We may see mega-mergers create superpowers in the supermarket sector. Arun Sundaram of CFRA Research expects Albertsons to divest 100 to 375 overlapping store locations. IGA, Inc., is an American chain of grocery stores that operates in more than 41 countries. The CEOs for Kroger and Albertsons appeared before the U.S. Senate back in November to answer questions about the proposed merger, per NPR. Additional Information About Albertsons Companies and Where to Find It. 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. A customer shops in a Kroger grocery store on July 15, 2022 in Houston. To learn more about us, visit our newsroom and investor relations site. 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. ", "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. Overall, 48% of Albertsons approximately 2,270 stores are located within 3 miles of a Kroger-owned supermarket, Creditntell said. We are committed to creating #ZeroHungerZeroWaste communities by 2025. EBITDA Reconciliations1. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close. 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. 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. 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. 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. Colorado Attorney General Phil Weiser is visiting communities impacted by the proposed grocery store merger between Albertsons and Kroger. Albertsons was even able to buy back several of the stores . The returns will ultimately be pretty good and probably beat the stock market over the length of the investment, said Jeffrey Hooke, a former investment banker and author of the book The Myth of Private Equity, who is now a finance lecturer at Johns Hopkins Carey Business School. Big grocery chains like Kroger and Albertsons are already gouging families with inflated prices. Thats where the most uncertainty lies how many stores will they have to divest? said Arun Sundaram, an equity analyst at CFRA Research.