The Kroger and Albertsons companies have entered into a definitive agreement with C&S Wholesale Grocers for the sale of select stores, banners, distribution centres, offices and private label brands.
Subject to fulfilment of customary closing conditions, including the completion of the Kroger-Albertsons merger, C&S will pay Kroger an all-cash consideration of approximately $1.9 billion, including customary adjustments.
Prior to the closing, Kroger may require C&S to purchase up to an additional 237 stores in certain geographies. If additional stores are added to the transaction, C&S will pay Kroger additional cash consideration.
The sale is in connection with Kroger and Albertsons’ proposed merger, which was announced in October last year.
The transaction includes 413 stores, along with QFC, Mariano’s and Carrs brand names. In addition, Kroger will divest the Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro private label brands. It also sees the divestiture of operational infrastructure, including eight distribution centres, two offices and expert district, division and functional associates, to ensure C&S can continue to operate the divested stores without disruption.
Kroger and Albertsons say that the divestiture plan marks the next step toward the completion of the merger by “extending a well-capitalised competitor into new geographies”. The plan ensures that no stores will close as a result of the merger and that all frontline associates will remain employed.
Founded in 1918, wholesale grocery supply and supply chain solution provider, C&S, supplies more than 7,500 independent supermarkets, retail chain stores and military bases. The company currently operates Grand Union grocery stores and Piggly Wiggly franchise and corporate-owned stores in Midwestern US and in the states of North Carolina and South Carolina.
Rodney McMullen, chairman and CEO of The Kroger Co, said: “Following the announcement of our proposed merger with Albertsons, we embarked on a robust and thoughtful process to identify a well-capitalised buyer who will operate as a fierce competitor and ensure divested stores and their associates will continue serving their communities in the ways they do today. C&S achieves all these objectives…Importantly in our agreement, C&S commits to honouring all collective bargaining agreements which include industry-leading benefits, retaining frontline associates and further investing for growth.”
He continued: “We are confident the associates joining the C&S family will have an amazing opportunity to continue to build a thriving career in the food industry in one of the largest private companies in our country. C&S’s strong operational focus and financial resources, along with a comprehensive operational infrastructure included as part of the divestiture agreement, will position it to successfully operate and continue to grow these iconic brands for years to come.”
The divestiture plan fulfils the commitments Kroger and Albertsons’ set out in their original merger agreement last year with regard to divesting stores, including extending a competitor to new geographies through the sale of stores to a well-capitalised buyer that is led by seasoned operators with a strong balance sheet and a sound business plan; ensuring that no stores will close as a result of the merger; maintaining all current collective bargaining agreements, which include industry-leading healthcare and pension benefits, bargained-for wages, and ensuring frontline associates remain employed; and committing to invest in associates and stores for the long term.
Vivek Sankaran, CEO of Albertsons, commented: “I am thrilled that C&S’s outstanding capabilities and financial strength will ensure these divestiture stores can continue to grow and serve their communities as they do today. I echo Rodney’s confidence in the bright future ahead for the associates joining the C&S team.”
Eric Winn, COO and designated CEO (effective 2 October 2023) of C&S Wholesale Grocers, added: “We look forward to welcoming thousands of new associates to the C&S family and providing them the opportunity to build long and successful careers. As a leader in the grocery industry, we have a strong heritage of value and customer service that is enabled by a deep commitment to our consumers, employees and communities. Today’s announcement is another exciting opportunity for C&S to further expand into the retail market, which is an important component of our growth and future success. We look forward to providing a superior shopping experience that delivers both quality and value to our customers.”
Citi and Wells Fargo Securities are serving as financial advisors to Kroger, while Goldman Sachs & Co and Credit Suisse are serving as financial advisors to Albertsons Companies.
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