Post by icemandios on Oct 14, 2022 14:04:31 GMT
Kroger To Combine With Albertsons In $24.6 Billion Grocery Mega-Merger
Tyler Durden's Photo
BY TYLER DURDEN
FRIDAY, OCT 14, 2022 - 09:05 AM
After endless years of speculation about an eventual deal for grocery giant Kroger, it looks as though the chain is doing a deal of its own. Except, in this deal, Kroger isn't the acquiree, it's the acquirer, announcing this week a $24.6 billion combination with grocer Albertsons.
The combination puts Kroger on a par - in size and sales - with names like Walmart. The tie up results in Kroger having almost 5,000 stores and annual revenue of about $200 billion, according to Bloomberg.
Albertsons investors will get $34.10 per share in cash, which includes a special dividend, a statement this week said. It marks a premium of about 33% to its closing price on October 12. About 375 stores are planned to be sold in a spinoff, the Bloomberg report says.
With Kroger growing in size, the merger offers "increased buying power and an opportunity to save on costs as brick-and-mortar retailers invest heavily to enhance their online offerings," the report says.
In a joint statement, the two companies collectively said: “This combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households.”
They continued: “Consistent with prior transactions, Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers.”
It marks one of the largest deals in retail in years, Bloomberg noted, and it also gives Kroger a spot in the Northeast market, one of the few places it doesn't have an established footprint. The company currently has a 9.9% market share and is in the number 2 seller in the U.S., the report says. Walmart has a nearly 21% market share.
The merger will also almost certainly face regulatory scrutiny. Bloomberg Intelligence analyst Jennifer Bartashus commented on the merger: “A combination could offer substantial synergies and cost-savings, revenue and earnings-growth opportunities. But significant operations overlap may make gaining approval difficult, forcing potential divestitures.”
Simeon Gutman, an analyst at Morgan Stanley, commented that grocery sellers are a tough spot to create shareholder value because of their low margins.
“Perhaps the industry has reached a point of consolidation such that a potential merger of this magnitude could result in structurally higher margins. The industry may be closer to oligopoly than we think,” he commented.
Tyler Durden's Photo
BY TYLER DURDEN
FRIDAY, OCT 14, 2022 - 09:05 AM
After endless years of speculation about an eventual deal for grocery giant Kroger, it looks as though the chain is doing a deal of its own. Except, in this deal, Kroger isn't the acquiree, it's the acquirer, announcing this week a $24.6 billion combination with grocer Albertsons.
The combination puts Kroger on a par - in size and sales - with names like Walmart. The tie up results in Kroger having almost 5,000 stores and annual revenue of about $200 billion, according to Bloomberg.
Albertsons investors will get $34.10 per share in cash, which includes a special dividend, a statement this week said. It marks a premium of about 33% to its closing price on October 12. About 375 stores are planned to be sold in a spinoff, the Bloomberg report says.
With Kroger growing in size, the merger offers "increased buying power and an opportunity to save on costs as brick-and-mortar retailers invest heavily to enhance their online offerings," the report says.
In a joint statement, the two companies collectively said: “This combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households.”
They continued: “Consistent with prior transactions, Kroger plans to invest in lowering prices for customers and expects to reinvest approximately half a billion dollars of cost savings from synergies to reduce prices for customers.”
It marks one of the largest deals in retail in years, Bloomberg noted, and it also gives Kroger a spot in the Northeast market, one of the few places it doesn't have an established footprint. The company currently has a 9.9% market share and is in the number 2 seller in the U.S., the report says. Walmart has a nearly 21% market share.
The merger will also almost certainly face regulatory scrutiny. Bloomberg Intelligence analyst Jennifer Bartashus commented on the merger: “A combination could offer substantial synergies and cost-savings, revenue and earnings-growth opportunities. But significant operations overlap may make gaining approval difficult, forcing potential divestitures.”
Simeon Gutman, an analyst at Morgan Stanley, commented that grocery sellers are a tough spot to create shareholder value because of their low margins.
“Perhaps the industry has reached a point of consolidation such that a potential merger of this magnitude could result in structurally higher margins. The industry may be closer to oligopoly than we think,” he commented.