Plan Marks Key Step in Merger Process
Both the Kroger and Albertsons Cos.
Combination and the Divestiture Sale to C&S will Create
Meaningful and Measurable Benefits for Associates, Customers and
Communities
Agreement with C&S Includes Sale of 413
Stores, 8 Distribution Centers,
2 Offices and 5 Private Label Brands Across 17 States and the
District of Columbia
Extending a Well-Capitalized Competitor into New
Geographies
Agreement Includes Sale of the QFC, Mariano's
and Carrs Brand Names and the Exclusive Licensing Rights to the
Albertsons Brand Name in Arizona,
California, Colorado and Wyoming
C&S, an Industry Leader in Wholesale
Grocery Supply and One of the Largest
Privately Held Companies in the United States, Brings 104
Years of Food Industry Experience
and a Track Record as a Successful Grocery Retailer
C&S Agrees to Maintain Collective
Bargaining Agreements, Securing the Future of Union Jobs
Merger Remains on Track to Close in Early
2024,
Subject to Regulatory Clearance and Other Closing
Conditions
CINCINNATI and BOISE, Idaho, Sept. 8,
2023 /PRNewswire/ -- The Kroger Co. (NYSE: KR) and
Albertsons Companies Inc. (NYSE: ACI) announced today that they
have entered a definitive agreement with C&S Wholesale Grocers,
LLC for the sale of select stores, banners, distribution centers,
offices and private label brands in connection with their proposed
merger previously announced on October 14,
2022.
The proposed merger will create meaningful and measurable
benefits for America's consumers, Kroger and Albertsons associates,
and communities that both Kroger and Albertsons serve by expanding
access to fresh, affordable food and establishing a more compelling
alternative to large, non-union retailers. This comprehensive
divestiture plan marks a key next step toward the completion of the
merger by extending a well-capitalized competitor into new
geographies. The divestiture plan ensures no stores will close as a
result of the merger and that all frontline associates will remain
employed, all existing collective bargaining agreements will
continue, and associates will continue to receive industry-leading
health care and pension benefits alongside bargained-for wages.
C&S is an industry leader in wholesale grocery supply and
supply chain solutions, with a strong track record as a successful
grocery retailer. Founded in 1918 as a supplier to independent
grocery stores, C&S services customers of all sizes, supplying
more than 7,500 independent supermarkets, retail chain stores and
military bases. Grounded in its commitment to feeding families
across America, C&S currently operates Grand Union grocery
stores and Piggly Wiggly® franchise and corporate-owned
stores in the Midwest and Carolinas. C&S is deeply invested in
the communities where it operates, and this retail expansion will
continue its long-standing mission to keep communities fed. Through
its wholesale and retail operations, C&S purchases more than
100,000 products, giving it the ability to provide customers with
the best product selection and pricing available. In addition to
its franchise and corporate owned supermarkets, C&S provides
end-to-end wholesale, supply and marketing services to its retailer
customers. C&S also brings experience with the merger process,
having been an FTC-approved divestiture buyer in prior grocery
transactions with a strong track record of successfully
transitioning union employees and their associated collective
bargaining agreements. In anticipation of the agreement, C&S's
1918 Winter Street Partners retail holding company has been
established to ensure a seamless closing process. C&S's depth
of industry knowledge, financial strength and commitment to growing
its associates' careers makes it the right fit to ensure the
divested stores, distribution centers and offices grow and thrive
for years to come.
"Following the announcement of our proposed merger with
Albertsons Cos., we embarked on a robust and thoughtful process to
identify a well-capitalized buyer who will operate as a fierce
competitor and ensure divested stores and their associates will
continue serving their communities in the ways they do today.
C&S achieves all these objectives," said Rodney McMullen, chairman and CEO of The Kroger
Co. "C&S is led by an experienced management team with an
extensive background in food retail and distribution and has the
financial strength to continue investing in associates and the
business for the long run. Importantly in our agreement, C&S
commits to honoring all collective bargaining agreements which
include industry-leading benefits, retaining frontline associates
and further investing for growth."
McMullen continued, "We appreciate our incredible associates who
support and serve our customers and communities, and who help both
of our companies succeed. C&S will offer exciting opportunities
for associates to advance their careers – from frontline associates
and store leaders to merchants and other professionals. We are
confident the associates joining the C&S family will have an
amazing opportunity to continue to build a thriving career in the
food industry in one of the largest private companies in our
country. C&S's strong operational focus and financial
resources, along with a comprehensive operational infrastructure
included as part of the divestiture agreement, will position it to
successfully operate and continue to grow these iconic brands for
years to come. C&S is a values-driven organization that is
committed to ending hunger while creating healthier communities –
now and for future generations."
The divestiture plan fulfills the commitments Kroger and
Albertsons Cos. set out in their original merger agreement in
October 2022 with regard to divesting
stores, including:
- Extending a competitor to new geographies through the sale of
stores to a well-capitalized buyer that is led by seasoned
operators with a strong balance sheet and a sound business
plan;
- Ensuring that no stores will close as a result of the
merger;
- Maintaining all current collective bargaining agreements, which
include industry-leading healthcare and pension benefits,
bargained-for wages, and ensuring frontline associates remain
employed; and
- Committing to invest in associates and stores for the long
term.
Kroger took several steps to ensure a thoughtful and
comprehensive divestiture plan. The terms of the plan support
C&S's ability to operate divested stores effectively and
efficiently by providing:
- Strong teams, with deep industry expertise and the ability to
operate at scale, and to drive growth and operational advancements
in the divested business;
- A cohesive set of stores in each geography supported by two
regional headquarters as well as banners, and private label brands
with strong consumer recognition that will provide C&S
with an established base on which to grow its store network;
and
- A robust operational infrastructure, including distribution
centers and offices to support both the immediate and long-term
success of the divested business.
"I have long respected C&S and its leadership team," said
Vivek Sankaran, CEO of Albertsons
Companies. "I am thrilled that C&S's outstanding capabilities
and financial strength will ensure these divestiture stores can
continue to grow and serve their communities as they do today. Most
importantly, they have made a clear commitment to continuing to
invest in and care for associates, including by honoring all
collective bargaining agreements currently in place. I echo
Rodney's confidence in the bright future ahead for the associates
joining the C&S team."
"We look forward to welcoming thousands of new associates to the
C&S family and providing them the opportunity to build long and
successful careers," said Eric Winn,
Chief Operating Officer and designated Chief Executive Officer
(effective October 2) of C&S
Wholesale Grocers. "As a leader in the grocery industry, we have
a strong heritage of value and customer service that is
enabled by a deep commitment to our consumers, employees and
communities. Today's announcement is another exciting opportunity
for C&S to further expand into the retail market, which is an
important component of our growth and future success. We look
forward to providing a superior shopping experience that delivers
both quality and value to our customers."
Transaction Details
The divestiture transaction includes 413 stores, along with QFC,
Mariano's and Carrs brand names. Stores currently under these
banners that are retained by Kroger will be re-bannered into one of
the retained Kroger or Albertsons Cos. banners following the close
of the transaction. In the four states where C&S will have the
license to the Albertsons banner, Kroger will re-banner the
retained stores following the close of the merger with Albertsons
Cos. Kroger will maintain the Albertsons banner in the remaining
states. In addition, Kroger will divest the Debi Lilly Design,
Primo Taglio, Open Nature,
ReadyMeals and Waterfront Bistro private label brands.
The number of stores contained in the divestiture plan by
geography is as follows:
- WA: 104 Albertsons Cos. and Kroger stores
- CA: 66 Albertsons Cos. and Kroger stores
- CO: 52 Albertsons Cos. stores
- OR: 49 Albertsons Cos. and Kroger stores
- TX/LA: 28 Albertsons Cos. stores
- AZ: 24 Albertsons Cos. stores
- NV: 15 Albertsons Cos. stores
- IL: 14 Kroger stores
- AK: 14 Albertsons Cos. stores
- ID: 13 Albertsons Cos. stores
- NM: 12 Albertsons Cos. stores
- MT/UT/WY: 12 Albertsons Cos. stores
- DC/MD/VA: 10 Harris Teeter stores
The above stores (regardless of banner) will be divested by
Kroger following the closing of the merger with Albertsons Cos.
Additional Terms of the Transaction
The definitive purchase agreement has customary representations
and warranties and covenants of a transaction of its type. The
transaction also provides a comprehensive operational
infrastructure including eight distribution centers, two offices,
five private label brands, and expert district, division and
functional associates, to ensure C&S can continue to operate
the divested stores competitively and cohesively with no disruption
to the associate or customer experience. All fuel centers and
pharmacies associated with the divested stores will remain with the
stores and continue to operate.
Subject to fulfillment of customary closing conditions,
including FTC and other governmental clearance, and the completion
of the Kroger-Albertsons merger, C&S will pay Kroger an
all-cash consideration of approximately $1.9
billion, including customary adjustments.
Prior to the closing, Kroger may, in connection with securing
FTC and other governmental clearance, require C&S to purchase
up to an additional 237 stores in certain geographies. If
additional stores are added to the transaction, C&S will pay to
Kroger additional cash consideration based upon an agreed upon
formula.
As a result of the comprehensive divestiture plan announced
with C&S, Kroger has exercised its right under the merger
agreement to sell what would have been the SpinCo business
to C&S. Consequently, the spin-off previously
contemplated by Kroger and Albertsons Cos. is no longer a
requirement under the merger agreement and will no longer be
pursued by Kroger and Albertsons Cos.
Merger creates meaningful benefits for customers, associates
and communities
The divestiture plan is another key step toward the completion
of the proposed merger between Kroger and Albertsons Companies. The
combination will bring together two complementary companies and
create meaningful and measurable benefits for customers, associates
and communities. The combination will advance Kroger's Leading
with Fresh, Accelerating with Digital strategy, which is
grounded in Fresh, Our Brands, personalization and seamless.
By doing so, the combined company will continue to invest in
improving the customer experience and serving more communities
across the country with fresh, affordable food. With a family of
well-known, trusted brands, the combined company will offer
customers lower prices and more choices for the fresh foods
customers need, want and love – all with a seamless, omnichannel
shopping experience.
The combination will allow Kroger and Albertsons Cos. to unlock
significant benefits, including:
- Advancing a Brighter Future for Our Associates. The
combined company will benefit associates seeking to grow their
careers. Kroger added more than 100,000 good-paying union jobs
since 2012, and it anticipates continuing on this trajectory. The
retailer committed to investing $1
billion in improving associates' wages and comprehensive
benefits post close. This commitment builds on the $1.9 billion in incremental investments Kroger
made in wages and comprehensive benefits since 2018. The combined
company has also committed to providing associates with programs
aimed at continuing education and financial literacy following the
completion of the merger. The combination will create a compelling
alternative to large, non-union competitors.
- Serving More of America with Fresh, High-Quality and
Affordable Food. Kroger built its business model on a
foundation of bringing customers lower prices and more choices for
the foods their families need to thrive. The retailer committed to
investing $500 million beginning day
one post close to reduce prices for customers in stores across the
U.S. An incremental $1.3 billion will
also be invested to enhance the customer experience. The
combination advances Kroger's work to make its products more
affordable and accessible to more families, ultimately supporting a
food system that will feed people across the U.S. for years to
come.
- Driving Meaningful Improvements Where It Matters
Most. The combination will create more opportunities to
invest in communities across America as the company continues its
journey to eliminate hunger and food waste. In June 2023, Kroger announced its commitment to
donate 10 billion meals as a combined company upon completion of
the proposed merger to families across the country by 2030.
Putting this commitment into context, ten billion meals are enough
to feed every person in the cities of Seattle, Denver, Chicago and Boston every meal, every day, for nearly two
years. As a result of a strategic focus on donating surplus fresh
food and charitable giving, the combined company will accelerate
its ability to feed its neighbors and reduce waste, especially food
waste.
The merger remains on track 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. Kroger and
Albertsons Cos. remain committed to working cooperatively with the
regulators and all other interested parties to complete the
transaction and unlock the many benefits it offers.
Read more about the combined company's commitment to customers,
associates and communities at www.krogeralbertsons.com
Kroger Second Quarter 2023 Earnings Results and Conference
Call
In a separate press release issued today, Kroger reported its
second quarter 2023 results.
Kroger's quarterly conference call with investors will be
broadcast as scheduled at 10 a.m.
(ET) on September 8, 2023 at
ir.kroger.com. An on-demand replay of the webcast will be available
at approximately 1 p.m. (ET) on Friday,
September 8, 2023.
Advisors
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.
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.
About Kroger
At The Kroger Co. (NYSE: KR),
we are dedicated to our Purpose: To Feed the Human Spirit™. We are,
across our family of companies nearly half a million associates who
serve over 11 million customers daily through a seamless digital
shopping experience and retail food stores under a variety
of banner names, serving America through food inspiration and
uplift, and creating #ZeroHungerZeroWaste communities by 2025. To
learn more about us, visit our newsroom and investor
relations site.
About Albertsons Companies, Inc.
Albertsons
Companies is a leading food and drug retailer in the United States. As of June 17, 2023, the Company operated 2,272 retail
food and drug stores with 1,726 pharmacies, 401 associated fuel
centers, 22 dedicated distribution centers and 19 manufacturing
facilities. The Company 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. The Company is
committed to helping people across the country live better lives by
making a meaningful difference, neighborhood by neighborhood. In
2022, along with the Albertsons Companies Foundation, the Company
contributed more than $200 million in
food and financial support, including more than $40 million through our Nourishing Neighbors
Program to ensure those living in our communities and those
impacted by disasters have enough to eat.
About C&S Wholesale Grocers, LLC
C&S Wholesale
Grocers, LLC is an industry leader in supply chain solutions and
wholesale grocery supply in the United
States. Founded in 1918 as a supplier to independent grocery
stores, C&S now services customers of all sizes, supplying more
than 7,500 independent supermarkets, chain stores, military bases
and institutions with over 100,000 different products. We are an
engaged corporate citizen, supporting causes that positively impact
our communities. To learn more, please visit www.cswg.com.
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 and divestiture plan. These statements are
based on the assumptions and beliefs of Kroger and Albertsons Cos.
management in light of the information currently available to them.
Such statements are indicated by words or phrases such as
"accelerate," "anticipates," "create," "committed," "confident,"
"continue," "deliver," "driving," "expect," "future," "guidance,"
"positioned," "strategy," "target," "synergies," "trends," and
"will." Various uncertainties and other factors could cause actual
results to differ materially from those contained in the
forward-looking statements. These include the specific risk factors
identified in "Risk Factors" in each of Kroger's and Albertsons
Cos.' 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 and
divestiture plan, including the timing, receipt and terms and
conditions of any required governmental and regulatory clearance of
the proposed transaction and divestiture plan; the impact of the
proposed divestiture plan; the occurrence of any event, change or
other circumstances that could give rise to the termination of the
merger agreement or divestiture 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 or divestiture plan; the inability to consummate the
proposed transaction or divestiture plan due to the failure to
satisfy other conditions to complete the proposed transaction or
divestiture plan; risks that the proposed transaction disrupts
current plans and operations of Kroger and Albertsons Cos.; the
ability to identify and recognize the anticipated benefits of the
proposed transaction, including expectations and synergies; the
amount of the costs, fees, expenses and charges related to the
proposed transaction or divestiture plan; and the ability of Kroger
and Albertsons Cos. 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. The ability of Kroger and Albertsons Cos.
to achieve the goals for the proposed transaction may also be
affected by their ability to manage the factors identified
above.
The forward-looking statements by Kroger and Albertsons Cos.
included in this press release speak only as of the date the
statements were made. Neither Kroger nor Albertsons Cos. assumes
the obligation to update the information contained herein unless
required by applicable law. Please refer to the reports and filings
of Kroger and Albertsons Cos. with the Securities and Exchange
Commission for a further discussion of the risks and uncertainties
that affect them and their respective businesses.
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SOURCE The Kroger Co.