Parent Companies of Fred Meyer and Carrs/Safeway Agree to Merge
A Carrs store and a Fred Meyer store face each other across New Seward Highway in Midtown Anchorage.
Alaska Business
Shopping options for Alaskans may shrink if regulators approve the largest retail merger the state has seen since Safeway took over Carrs supermarkets in 1999. Albertsons, the Idaho-based retail chain that has owned Safeway since 2014, agreed to a buy-out by Kroger, the parent company of Fred Meyer stores.
$24.6B Deal
The boards of both companies unanimously approved the purchase. Kroger, headquartered in Cincinnati, would acquire all outstanding shares of Albertsons Companies common and preferred stock 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. The cash component may be reduced, subject to store divestiture and a one-time dividend to Albertsons shareholders of approximately $6.85 per share, or up to $4 billion total.
Kroger plans to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers. An incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience. The combined company expects to invest $1 billion to continue raising associate wages and comprehensive benefits after close.
Together, Albertsons and Kroger operate 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies, and 2,015 fuel centers across forty-eight states. The companies have a combined workforce of more than 710,000 employees. The merger gives Kroger access to northeastern states, while the companies overlap in West Coast markets.
On a combined basis, the companies delivered approximately $210 billion in revenue, $3.3 billion in net earnings, and $11.6 billion of adjusted EBITDA in fiscal year 2021.
Current Issue
November 2024
“We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities, and shareholders,” says Rodney McMullen, chairman and CEO of Kroger. “Albertsons Cos. brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores.”
Following the close of the transaction, McMullen will continue to serve as chairman and CEO, and Gary Millerchip will continue to serve as chief financial officer of the combined company.
The CEO of Albertsons, Vivek Sankaran, says, “We have been on a transformational journey to evolve Albertsons Companies 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.”
Meet SpinCo
If the Kroger-Albertsons merger is approved, the combined company is unlikely to compete against itself in Midtown Anchorage, where two stores face each other across New Seward Highway.
Alaska Business
Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. At closing, the company plans to fund the transaction using a combination of cash on hand and proceeds from new debt financing.
In connection with obtaining the requisite regulatory clearance, Kroger and Albertsons expect to make store divestitures. Albertsons is prepared to establish a spin-off subsidiary named SpinCo to operate as a standalone public company holding between 100 and 375 stores as a competitor.
Kroger and Albertsons sell a combined portfolio of approximately 34,000 total private label products across all price points. The merged company’s manufacturing footprint and expanded national reach could drive improved quality and efficiency.
The companies also see an opportunity to drive additional traffic to digital channels. The combined company will be able to reach an expanded national audience of approximately 85 million households nationwide, fueling growth in alternative profit businesses such as Retail Media, Kroger Personal Finance, and Customer Insights. The combined capabilities will accelerate the growth of Kroger’s higher-margin revenue streams by extending the portfolio of solutions and accelerating their respective growth.
Fred Meyer stores employ more than 3,300 Alaskans; Carrs-Safeway employs almost 3,000 at twenty-four stores statewide. As a condition of Safeway’s 1999 takeover of Carrs, several locations were divested, none of which remain in the grocery business today.
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