The Kroger Co. announced Dec. 11 that it had terminated its merger agreement with Albertsons – the same day the latter announced it would also end the arrangement – after the U.S. District Court for the District of Oregon granted the FTC’s request for a preliminary injunction to block the proposed deal.
After reviewing options, Kroger said it determined it was no longer in its best interests to pursue the merger.
“Kroger is moving forward from a position of strength. Our go-to-market strategy provides exceptional value and unique omnichannel experiences to our customers which powers our value creation model,” said Rodney McMullen, Kroger’s chairman and CEO.
“We look forward to accelerating our flywheel to grow our alternative profit businesses and generate increased cash flows. The strength of our balance sheet and sustainability of our model allows us to pursue a variety of growth opportunities, including further investment in our store network through new stores and remodels, which will be an important part of our 8-11 percent TSR model over time.”
In addition, Kroger reiterated its “commitment to investing in America” to lower grocery prices, raise employee wages and support communities. Since 2017, the grocer has donated $2.3 billion through charitable giving, including $1.5 billion toward hunger-relief efforts.
“We are at our best when we serve others – our customers, associates and communities – and we take seriously our responsibility to provide great value by consistently lowering prices and offering more choices,” McMullen said.
“When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices, a better shopping experience and higher wages. We know this model works because we’ve been doing it successfully for many years, and this is exactly what we will continue to do.”
Share repurchase program
Kroger added that it will resume share repurchases after a more than two-year pause due to the proposed merger. Kroger’s board of directors approved a program authorizing the repurchase of up to $7.5 billion of common stock. This replaces Kroger’s current $1 billion authorization, which was approved in September 2022.
“Our strong balance sheet and free cash flows position us to deliver on our commitment to grow the business and return capital to shareholders, maintaining capacity to invest in lower prices and higher associate wages,” McMullen said.
Looking forward, Kroger plans to host an Investor Day event in late spring to share an update on its strategic priorities, future growth prospects and long-term financial outlook.
[RELATED: Albertsons Suing Kroger For Breach Of Merger Agreement]
Merger debt redemption
In connection with the termination of the merger agreement, Kroger will begin the process of redeeming the $4.7 billion of its senior notes issued Aug. 27 that include a special mandatory redemption provision in accordance with their terms.
Kroger stated that it has also “elected to terminate its previously announced offers to exchange any and all outstanding notes issued by Albertsons Companies Inc., New Albertsons L.P., Safeway Inc., Albertson’s LLC, Albertsons Safeway LLC and American Stores Company LLC, for up to $7,441,608,000 aggregate principal amount of new notes to be issued by Kroger and cash.
Kroger also elected to terminate the related solicitation of consents on behalf of the ACI Issuing Entities to adopt certain proposed amendments to the indentures governing the ACI Notes.
“As a result of the exchange offer being terminated, the total consideration, including any consent fee, will not be paid or become payable to holders of the ACI Notes who have validly tendered and not validly withdrawn their ACI Notes for exchange in the exchange offer, and the ACI Notes validly tendered and not validly withdrawn for exchange pursuant to the exchange offer will be promptly returned to the tendering holders. As a result of the consent solicitation being terminated, the proposed amendments to the ACI Indentures and the supplemental indentures previously entered into reflecting such proposed amendments will not become operative.”
Please open one a store in Royse City!