Deal ushers U.K.-based EG Group into the U.S. market
CINCINNATI — Several months after putting its convenience store business on the block, The Kroger Co. has landed a $2.15 billion deal to sell the unit to EG Group, a United Kingdom-based fuel station convenience store retailer.
Kroger said Monday that the companies expect to finalize the transaction in its fiscal first quarter, pending regulatory approval and other customary closing conditions.
Operating in 18 states, Kroger’s convenience store business employs 11,000 people and includes 66 franchise operations, with stores under the Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop banners. The business generated sales of $4 billion in 2016. Kroger’s supermarket fuel centers and its Turkey Hill Dairy aren’t included in the sale.
“Our convenience store business has been a part of our company for many years. We want to thank our management team and associates for their enduring commitment to our customers, and for the contributions they have made to build our supermarket fuel business,” Mike Schlotman, executive vice president and chief financial officer at Kroger, said in a statement. “As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business.”
Under the agreement, EG Group will base its North American headquarters in Cincinnati and operate stores under their current banners, Kroger said.
“One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates. We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati. EG Group is also a recognized international petrol forecourt convenience operator, and they have a commercial model which clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust,” Schlotman added. “This is good for our associates across the country and for our headquarters city of Cincinnati. Throughout the process, we were impressed with the EG Group’s professionalism, investment commitment and, more importantly, their understanding of the U.S. convenience retail market.”
Kroger had announced in October that it would explore strategic alternatives for its convenience store business, including a potential sale, as it moved ahead with its “Restock Kroger” initiative. The company said it plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.
Currently, EG Group has no U.S. presence, and consequently the companies expect the transaction to close quickly.
“The entry into the U.S. market presents a fantastic opportunity to deliver a successful retail offer to consumers across the various states. We have had much success across Europe, and we firmly believe the Kroger assets present a fantastic foundation to overlay our retail experience and know-how in the U.S.,” commented Mohsin Issa, EG Group founder and co-chief executive officer. “We are committed to investing in the Kroger network, partnering with leading retail brands and working with the exceptional management team and associates transferring across to deliver a comprehensive retail offer.”
The EG Group has more than 2,600 retail sites across Europe, including the United Kingdom, France, The Netherlands, Belgium, Luxembourg and Italy. Last year, the company secured about 1,000 fuel station retail assets from Esso in Germany, which are slated be transferred and integrated into its network later this year. Including the Kroger assets, EG Group will own and operate about 4,400 sites across Europe and the United States.
“In the U.S., we aim to create a retail environment which delivers convenience, provides value and serves as a retail destination offering excellent welfare to motorists who live and work near our petrol forecourt convenience retail stores,” stated Zuber Issa, EG Group founder and co-CEO.