Kroger to acquire US food and drug retailer Albertsons Cos. for $24.6bn

Kroger acquisition of Albertsons : Supermarket chain Kroger has agreed to acquire American food and drug retailer Albertsons Companies (Albertsons Cos.) for a price of around $24.6 billion, which includes the assumption of around $4.7 billion of the latter’s net debt.

Both the American retailers are listed on the New York Stock Exchange (NYSE).

As of 18 June 2022, Albertsons Companies had 2,273 retail food and drug stores with 1,720 pharmacies, 402 associated fuel centers, 22 distribution centers, and 19 manufacturing facilities.

The food and drug retailer operates stores in 34 states and the District of Columbia in the US under 24 banners. These include Albertsons Safeway, Jewel-Osco, Vons, Acme, Shaw’s, Randalls, Tom Thumb, Pavilions, United Supermarkets, Haggen, Star Market, Kings Food Markets, Carrs, and Balducci’s Food Lovers Market.

Kroger acquisition of Albertsons. Photo courtesy of MortalConviction at English Wikipedia.

Financial terms of Kroger acquisition of Albertsons

As per the terms of the deal, shareholders of Albertsons Companies will be paid $34.1 per share. Furthermore, the food and drug retailer will pay its shareholders a special cash dividend of up to $4 billion.

The cash portion of the $34.1 per share consideration will be deducted by the per share amount of the special cash dividend, which is likely to be around $6.85 per share.

Vivek Sankaran — CEO of Albertsons Companies, commenting on Kroger acquisition of Albertsons, said: “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.”

Kroger, Albertsons merger deal. Photo courtesy of Ambrosia LaFluer/Wikimedia Commons.

Presently Albertsons Companies and Kroger have a combined workforce of over 710,000 associates. Kroger, Albertsons merger deal will result in bringing together 4,996 stores, 52 manufacturing plants, 66 distribution centers, 2,015 fuel centers, and 3,972 pharmacies.

The two American retail companies put together generated around $210 billion in revenue and net earnings of $3.3 billion in the fiscal year 2021.

Kroger said that an incremental $1.3 billion will be injected into the stores of Albertsons Companies for elevating customer experience. In addition to that, the enlarged American retailer after the closing of the deal expects to make an investment of $1 billion towards the increase of associate wages and benefits.

Commenting on Kroger acquisition of Albertsons, Rodney McMullen — Kroger Chairman and CEO, who will continue in the same role in the combined company, said: “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 portfolio, and delivering personalized value and savings.”

Closing of Kroger acquisition of Albertsons

In order to get the requisite regulatory clearance needed for closing the deal, Kroger and Albertsons Companies expect to sell certain stores.

The deal is backed by Albertsons Companies’ shareholders holding more than a majority of its common stock.

Subject to regulatory clearance and other customary conditions, Kroger acquisition of Albertsons is likely to close in early 2024.