CINCINNATI — Kroger and Albertson grocery stores announced Friday a plan to merge together.

According to a press release, the plan contains establishing, "a national footprint" and uniting around Kroger's Purpose to Feed the Human Spirit.

What You Need To Know

  • Kroger and Albertson grocery stores announced Friday a plan to merge together

  • The board of directors from each company approved the merger agreement

  • Between the two companies, more than 710,000 associates are employed and 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers are in operation

  • Kroger plans to invest in lowering prices for customers and to reinvest approximately half a billion dollars of cost savings into reducing prices

The board of directors from each company approved the merger agreement, which includes Kroger acquiring all outstanding shares of Albertsons Companies, Inc. common and preferred stock, on an as converted basis, for an estimated total of $34.10 per share. This implies a total enterprise value of approximately $24.6 billion, including the assumption of $4.7 billion of Albertsons' net debt.

"Subject to the outcome of a store divestiture process, the cash component of the $34.10 per share consideration may be reduced by the per share value of a newly created standalone public company ("SpinCo") that Albertsons Cos. is prepared to spin off at closing in conjunction with the regulatory clearance process," the news release said.

Albertsons will pay a cash dividend of up to $4 billion to its shareholders. The cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be approximately $6.85 per share.

The cash dividend will be payable on Nov. 7 to shareholders as record of the close of business on Oct. 24. The purchase price represents a premium of approximately 32.8% to the unaffected closing price of Albertsons Cos. common stock on Oct. 12, and 29.7% to the 30-day volume-weighted average price. 

Between the two companies, more than 710,000 associates are employed and 4,996 stores, 66 distribution centers, 52 manufacturing plants, 3,972 pharmacies and 2,015 fuel centers are in operation.

"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."

The news release said the combination of associates and operating stores, plants, pharmacies and fuel centers create a "premier seamless ecosystem across 48 states and the District of Columbia."

Kroger plans to invest in lowering prices for customers and to reinvest approximately half a billion dollars of cost savings into reducing prices. 

An incremental $1.3 billion will also be invested into Albertsons stores to enhance the customer experience. According to the press release, Kroger will continue to build on associate wages, training and benefits. The company has invested $1.2 billion in associate compensation and benefits since 2018 and with the merger, expects to invest $1 billion to raise wages and benefits after the close. 

"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," said McMullen. "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."

McMullen said with the merger, the combined company will be able to enhance technology, promote healthier lifestyles and grow alternative profit business. 

"This transaction is a testament to the passion and commitment of both Albertsons Cos. and Kroger associates," he said in the news release. "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 organizations' distinctive banners and storied histories."

McMullen said the merger secures union jobs and as a combined company, will create a culture embracing, "diversity, equity and inclusion and fosters a best-in-class associate experience by enabling, supporting and empowering our associates to unlock their full potential"

 Vivek Sankaran, CEO of Albertsons Cos, said Albertsons has been on a transformational journey into a modern retailer.

"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 Sankaran.

Sankaran said by combining with Kroger, customers will be provided 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," Sankaran said. "We look forward to working together with Kroger to capture the compelling opportunities ahead."

Kroger and Albertsons Cos. expect to make store divestitures. As described in the merger agreement and subject to the outcome of the divestiture process, Albertsons Cos. is prepared to establish an Albertsons Cos. subsidiary (SpinCo).

SpinCo would be spun off to Albertsons Cos. shareholders immediately prior to the merger closing and operate as a standalone public company. Kroger and Albertsons Cos. have agreed to work together to determine which stores would comprise SpinCo, as well as the pro forma capitalization of SpinCo. 

SpinCo would comprise between 100-375 stores, which would create a new, agile competitor. 

Kroger and Albertsons Cos. will provide additional details regarding SpinCo prior to closing.

Following the close of the transaction, Rodney McMullen will continue to serve as chairman and chief executive officer and Gary Millerchip will continue to serve as chief financial officer of the combined company.

"Today's announcement marks the successful outcome of the Board-led review of strategic alternatives Albertsons Cos. announced in February," said Chan Galbato, co-chair of the Albertsons Cos. Board of Directors and chief executive officer of Cerberus Operations. "This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans."

For more information on the merger, click here.