The Kroger Co. has announced its intention to acquire Giant Eagle, a family-owned food and pharmacy retailer with about $9 billion in annual sales and 197 supermarkets and 11 standalone pharmacies in northern Ohio, western Pennsylvania, West Virginia, Maryland and Indiana.
With a purchase price of $1.65 billion, the transaction has been unanimously approved by Kroger’s board of directors. It is expected to close in 2027, subject to receipt of required regulatory clearance and other customary closing conditions.
The transaction is comprised of $1.25 billion in cash consideration and the assumption of about $400 million in outstanding liabilities.
Kroger said the deal is consistent with its approach to capital allocation and focus on acquisitions where the company can create clear value for customers, employees and shareholders.
“Giant Eagle is a well-run, high-quality regional grocer with a strong reputation for fresh products, pharmacy, private label and customer loyalty,” said The Kroger Co. CEO Greg Foran.
“We evaluated the opportunity carefully, and the strategic fit is clear. Giant Eagle expands our reach into attractive adjacent markets, allowing us to do what we do best: run outstanding stores, deliver fresh foods and convenient meal solutions at affordable prices, and take care of our customers and associates every single day.”
The retailer stated that “Giant Eagle’s established store base, loyalty program, pharmacy business and private label portfolio provide a strong foundation for growth. Together with Kroger’s e-commerce solutions, data and personalization capabilities and operating discipline, we see significant opportunity to accelerate growth both in-store and online, enhance the customer experience and create long-term value for shareholders.”
The companies plan to build on Giant Eagle’s long history of community engagement by bringing Kroger’s Zero Hunger | Zero Waste impact plan to new communities.
“Today’s announcement marks an exciting next chapter for our team members, customers, vendors and community partners,” said Giant Eagle CEO Bill Artman.
“Together with Kroger, we will be well-positioned to advance our strategy and deliver better quality and service, better everyday value,and a better shopping experience for our customers, while providing greater growth opportunities for our dedicated team members.”
Financial impact
Kroger will finance the transaction with cash. Following the close of the transaction, the company expects to maintain its net total debt to adjusted EBITDA ratio target range of 2.3-2.5x.
As part of Kroger’s commitment to shareholder returns, the company expects to maintain its dividend, subject to board approval, continue its previously announced $2 billion share repurchase program and preserve financial flexibility to invest in its strategic priorities and core business.
Kroger expects the transaction to be accretive to adjusted EPS per diluted share in the second full year after close, excluding one-time transaction and integration costs.
In connection with obtaining the requisite regulatory clearance necessary to consummate the transaction, Kroger and Giant Eagle expect to make limited Giant Eagle store divestitures.
Industry response
The National Grocers Association (NGA), the trade association representing the independent supermarket industry, released the following statement regarding the proposed acquisition of Giant Eagle by Kroger:
“NGA urges regulators to conduct a robust review of this proposed acquisition, with particular attention to its impact on competition in those specific local markets. Where store divestitures will be required, independent grocers should be prioritized as buyers to ensure local communities benefit from a diverse marketplace.
“With 69 percent of U.S. grocery sales controlled by just four national chains, strong antitrust enforcement is more important than ever to protect consumer choice, preserve competitive markets and maintain a level playing field for independent grocers, farmers, suppliers and the communities they serve.”
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What a terrible deal! $1.6 Billion for 200 stores in great locations? Also a terrible deal for Giant Eagle shoppers. Those customers shopped at Giant Eagle to avoid Kroger. Not good news at all.