The Kroger Co., Cincinnati, and Roundy’s Inc., Milwaukee, announced a definitive merger agreement on Nov. 11 under which Kroger will purchase all outstanding shares of Roundy’s for $3.60 per share in cash. The terms of the agreement were unanimously approved by the boards of directors of both companies.
Headed by Robert A. Mariano, chairman of the board, president and CEO, Roundy’s brings to Kroger an expanded footprint with a complementary base of 151 stores and 101 pharmacies in new geographies, including Milwaukee, Madison and Northern Wisconsin, which are served under the Pick ’n Save, Copps and Metro Market banners. The merger also expands Kroger’s presence in the Chicagoland area, where Roundy’s operates 34 stores under the Mariano’s banner. Roundy’s also operates two distribution centers in Oconomowoc and Mazomanie, WI, and a commissary in Kenosha, WI. Roundy's had revenues of nearly $4 billion for fiscal year 2014.
“We are delighted to welcome Roundy’s to the Kroger family,” says Rodney McMullen, Kroger’s chairman and CEO. “With a team of 22,000 talented associates, outstanding store locations and a shared commitment to putting customers first, we are excited about Roundy's future growth.
“Mergers for Kroger always involve both parties bringing something to the table. We admire what Bob Mariano has done with the Mariano’s banner in Chicago, where he has created an urban format that is resonating with customers, and we expect to apply Roundy's experience to our stores in urban areas around the country. Kroger's scale and strong financial position will enable Roundy's to reinvest in its home state of Wisconsin, while continuing to grow in Chicago. Together, we are committed to investing in Roundy's people, communities, stores and merchandising to deliver a fantastic customer experience that will create opportunities for associates, grow customer loyalty and revenue, and create value for shareholders."
Mariano adds, “We are excited about becoming part of The Kroger Co. Kroger's scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace. This is a great win for our customers, communities, employees and our shareholders, and I personally look forward to continue to exceed customer and employee expectations.”
Kroger plans to finance the transaction with debt and refinance Roundy's existing debt of $646 million based on market conditions. Consistent with the company's long-term commitment to returning cash to shareholders, Kroger intends to continue its quarterly dividend and share repurchase program, while managing free cash flow to reduce the leverage taken on from this merger. The transaction is expected to close by the end of the 2015 calendar year following the satisfaction of customary closing conditions.