In a bold move set to revolutionize the grocery industry, Kroger has unveiled its acquisition of Roundy’s Supermarkets for a staggering $800 million. The strategic deal secures a major foothold for the largest conventional supermarket chain in the United States as it enters new territories in Wisconsin and Chicago. The innovative Mariano’s banner will be absorbed into Kroger’s portfolio, marking a momentous chapter in the supermarket giant’s history.
An all-cash transaction with a responsible financing plan that uses debt is now possible thanks to a unanimous decision by the boards of both companies. The agreement stipulates that Kroger will purchase all outstanding Roundy shares at an attractive rate of $3.60 per share, a remarkable 65% premium over Roundy’s closing price on the previous Tuesday. Anticipated to be finalized before the end of the calendar year, the transaction’s successful completion hinges on a majority of Roundy’s shareholders tendering their shares. Encouragingly, Willis Stein & Partners, the private equity firm holding approximately 7% of Roundy’s shares, has already pledged its shares, further affirming the deal’s viability.
This strategic move equips Kroger with a total of 151 new stores and 101 pharmacies, establishing a formidable presence in previously uncharted territories such as Milwaukee, Madison, and Northern Wisconsin. These areas will now enjoy the offerings of Pick ‘n Save, Copps, and Metro Market, banners synonymous with quality and convenience. Moreover, the acquisition broadens Kroger’s reach in the Chicagoland area, where 34 stores operated by Roundy’s under Mariano’s banner are set to add a touch of innovation to the local retail landscape.
Roundy’s impressive portfolio includes two distribution centers situated in Oconomowoc and Mazomanie, Wisc., as well as a commissary in Kenosha, Wisc. In fiscal 2014, Roundy generated revenues close to $4 billion, showcasing its market prowess and business acumen.
Commenting on the deal, Rodney McMullen, the CEO of Kroger, emphasized the significance of mutual benefits. Kroger acknowledges the visionary approach of Roundy’s chairman, president, and CEO, Bob Mariano, particularly for his exceptional work in shaping Mariano’s banner into a resounding success in the Chicago urban landscape. Leveraging Roundy’s expertise, Kroger aims to apply similar ingenuity to its urban stores across the nation. The merger capitalizes on Kroger’s immense scale and robust financial position, empowering Roundy’s to reinvest in its roots in Wisconsin while simultaneously fostering growth and innovation in Chicago. The overarching goal is to create a superlative customer experience, spurring customer loyalty, increased revenue, and greater value for shareholders.
Bob Mariano expressed enthusiasm at the prospect of joining The Kroger Co., echoing the sentiment. He believes that the acquisition will expedite the realization of Roundy’s strategic initiatives, reinforcing its competitive edge. Customers, communities, employees, and shareholders stand to benefit significantly from this transformative venture, as it opens up new avenues for exceptional customer service and surpasses expectations across the board.
Upon closing, Roundy’s will function as a subsidiary of Kroger, with its operations guided by key members of the existing senior management team. Remarkably, the transaction does not entail any store closures, securing employment opportunities for associates under both Kroger and Roundy’s. Importantly, Roundy’s headquarters will continue to thrive in its home base of Milwaukee, ensuring continuity and commitment to the local community.
Kroger has outlined its expectations for the merger, anticipating it to be modestly accretive to earnings within the first year post-closure, excluding any merger-related expenses. Additionally, the company intends to explore refinancing options for the current $646 million debt on Roundy’s balance sheet, ensuring a sound financial future for the combined entity.
Kroger-Roundy’s merger marks a monumental stride for the grocery retail sector, fostering innovation, growth, and a superior customer experience. With both companies committed to their shared vision, the stage is set for a dynamic and prosperous future, making grocery shopping an unparalleled delight for consumers far and wide.