Kroger said Wednesday that under the agreement it will buy all outstanding shares of Roundy’s for nearly $178 million in cash, or $3.60 per share, and assume Roundy’s $646 million in debt. Unanimously approved by the boards of both companies, the deal is expected to close by the end of the year.
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, under the Pick ‘n Save, Copps and Metro Market banners.
The merger also expands Kroger’s presence with an innovative format in the Chicago area, where Roundy’s operates 34 stores under the Mariano’s banner. Roundy’s also operates two distribution centers in Oconomowoc and Mazomanie, Wis., and a commissary in Kenosha, Wis.
“Mergers for Kroger always involve both parties bringing something to the table,” Rodney McMullen, Kroger’s chairman and chief executive officer, said in a statement. “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.”
Roundy’s had revenue of nearly $4 billion in fiscal 2014. Plans call for Roundy’s to continue to operate its stores as a subsidiary of Kroger and be led by key members of the Roundy’s senior management team, according to Kroger. There are no plans to close stores, and Roundy’s headquarters will remain in Milwaukee, Kroger said.
Together, Kroger and Roundy’s will operate 2,774 supermarkets, including more than 2,200 pharmacies, in 35 states and the District of Columbia.
“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,” stated Roundy’s chairman, president and CEO Robert Mariano.
Under the terms of the deal, Kroger will begin a tender offer for all of the outstanding shares of Roundy’s common stock. Any shares not acquired in the offer will be acquired by Kroger in a subsequent merger. The transaction is subject to Roundy’s stockholders tendering at least a majority of the outstanding shares of common stock in the tender offer, certain regulatory approvals and other customary closing conditions. In addition, the deal contains a 30-day go-shop period, which begins on the date of the agreement.