Kroger plans $800 million merger with Roundy’s
The Cincinnati-based Kroger Co. and Roundy’s, Inc., parent company of Copps grocery stores, announced Wednesday, Nov. 11, a definitive merger agreement has been reached. Kroger will purchase all outstanding shares of Roundy’s for $3.60 per share. Kroger will buy Roundy’s for a total of $800 million. Kroger will purchase the company for $154 million, but also absorb its $646 million in debt.
The transaction price represents a premium of approximately 65 percent to the Roundy’s closing share price on Nov. 10. The terms of the agreement were unanimously approved by the Boards of Directors of both companies.
Following finalization of the merger, Roundy’s will continue to operate its stores as a subsidiary of The Kroger Co. and will continue to be led by key members of Roundy’s senior management team. There are no plans to close stores, and associates will have employment opportunities with both companies. Roundy’s headquarters will remain in Milwaukee.
Under the terms of the merger agreement, Kroger will commence a tender offer for all of the outstanding shares of Roundy’s common stock. Any shares of Roundy’s common stock not acquired in the tender offer will be acquired by Kroger in a subsequent merger.
The transaction is subject to Roundy’s stockholders tendering at least a majority of the outstanding shares of Roundy’s common stock in the tender offer, certain regulatory approvals, and other customary closing conditions.
The transaction is not subject to any financing conditions. Willis Stein & Partners and its affiliates, holders of approximately 7 percent of the outstanding shares of Roundy’s common stock, have agreed to tender their shares.
The transaction is expected to close before the end of the 2015 calendar year.
“We are delighted to welcome Roundy’s to the Kroger family,” said Rodney McMullen, Kroger’s chairman and CEO. “With a team of 22,000 talented associates, outstanding store locations, and a shared commitment to putting customers first, we are excited about Roundy’s future growth.”
“Mergers for Kroger always involve both parties bringing something to the table,” McMullen said. “We admire what Bob Mariano has done with the Mariano’s banner in Chicago, where he has created an urban format that is resonating with customers and we expect to apply Roundy’s experience to our stores in urban areas around the country. Kroger’s scale and strong financial position will enable Roundy’s to reinvest in its home state of Wisconsin while continuing to grow in Chicago.
“Together, we are committed to investing in Roundy’s people, communities, stores and merchandising to deliver a fantastic customer experience that will create opportunities for associates, grow customer loyalty and revenue, and create value for shareholders,” he said.
“We are excited about becoming part of The Kroger Co. Kroger’s scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace,” said Robert Mariano, chairman of the board, president and CEO of Roundy’s. “This is a great win for our customers, communities, employees and our shareholders, and I personally look forward to continue to exceed customer and employee expectations.”
Roundy’s brings to Kroger an expanded footprint of 151 stores and 101 pharmacies in new geographies throughout Wisconsin, which are served under the Copps, Pick ‘n Save and Metro Market banners.
The merger also expands Kroger’s presence with an innovative store format in the Chicagoland area, where Roundy’s operates 34 stores under the Mariano’s banner. Roundy’s also operates two distribution centers in Oconomowoc and Mazomanie. Roundy’s formerly operated a distribution center in Stevens Point until it was closed last year.
Roundy’s had revenues of nearly $4.0 billion for fiscal year 2014.
Kroger officials said the company plans to finance the transaction with debt, and refinance Roundy’s existing debt of $646 million based on market conditions.
Kroger expects the merger to be slightly accretive to earnings in the first full year after closing, excluding merger-related expenses. The transaction will have no effect on Kroger’s current long-term net earnings per diluted share growth rate of 8 to 11 percent, plus a growing dividend.
Together, Kroger and Roundy’s will operate 2,774 supermarkets and employ over 422,000 associates across 35 states and the District of Columbia.
The transaction is expected to close by the end of the 2015 calendar year following the satisfaction of customary closing conditions, including successful completion of the tender offer and regulatory approval. The transaction includes customary breakup fees.