Kroger, Albertsons to merge to continue lowering prices, raising associate pay

TOPEKA, Kan. (WIBW) - Kroger and Albertsons grocery stores have announced a merger to continue to lower prices and raise associate pay.

On Friday, Oct. 14, Kroger, the national grocery store chain, said that it has entered into a definitive agreement to merge with Albertsons Companies, Inc., to establish a national footprint and unite its Purpose to Feed the Human Spirit.

“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders,” said Rodney McMullen, Kroger Chairman and Chief Executive Officer, who will continue serving as Chairman and CEO of the combined company. “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. 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. We believe this transaction will lead to faster and more profitable growth and generate greater returns for our shareholders.”

Through a network of well-known and trusted supermarket banners - including Dillons - Kroger said the combination will expand customer reach and improve its ability to deliver fresh and affordable food to about 85 million homes.

“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. Today’s announcement is a testament to their success,” said Vivek Sankaran, CEO of Albertsons Cos.

Under the terms of the merger, which Kroger said has been unanimously approved by the board of directors of both companies, it will acquire all outstanding shares of Albertsons Companies common and preferred stock for an estimated $34.10 per share 0 a total of about $24.6 billion. This includes an assumption of about $4.7 billion of Albertsons Cos. net debt.

Subject to the results of a divestiture process, Kroger noted that the cash component consideration may be reduced by per-share value due to the newly created standalone public company that Albertsons is prepared to spin off at closing in conjunction with regulatory clearance processes.

As part of the dal, Kroger indicated that Albertsons will pay a special cash dividend of up to $4 billion to shareholders. It said the per-share consideration will be reduced by the special cash dividend - which is about $6.85 per share. It said the dividend will be payable on Nov. 7 to shareholders of record as the business closes on Oct. 24.

“At Albertsons Cos., we are guided by an ambition to create customers for life. 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. Given the similarities in the culture and values at Kroger and Albertsons Cos., I am confident that the combination will also have a positive impact on our associates and the communities we are proud to serve. We look forward to working together with Kroger to capture the compelling opportunities ahead.”

Together, Kroger said that the two companies employ more than 710,000 associates and operate nearly 5,000 stores, 66 distribution centers, 52 manufacturing plants, nearly 4,00 pharmacies and just over 2,000 fuel centers. This will create a premier seamless ecosystem across 48 states and Washington, D.C., to provide customers with a greater shopping experience.

“Both Kroger and Albertsons Cos. are anchored by shared values focused on ensuring associates, customers and communities thrive,” said a Kroger spokesperson. “The combined company will drive profitable growth and sustainable value for all stakeholders.”

Kroger noted that it has a long track record of lowering prices, improving customer experience and investing in associates and communities. Consistent with previous transactions, it said it plans to invest in lowering prices and expects to reinvest about half a billion dollars to do so.

Kroger indicated that an incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience. It also said it will build on its recent investments in associate wages, training and benefits. It has invested an incremental $1.2 billion in associate compensation and benefits since 2018 and expects to invest $1 billion to continue to raise associate wages and benefits.

“This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates,” McMullen concluded. “Supporting and investing in our associates is foundational to both of our organizations and will continue to be a critical pillar of our success. Kroger has a track record of successful integrations that combine the strengths of each company while maintaining and enhancing each organization’s distinctive banners and storied histories. 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. Importantly, the merger secures union jobs and we will continue to work with local unions across America to serve our communities. We look forward to bringing the Albertsons Cos. and Kroger families together to create new and exciting career opportunities for associates.”

For more information about the merger, click HERE.