Reiterates Commitment to Investing in America
to Lower Grocery Prices, Raise Associate Wages, and Support Local
Communities
Highlights Resilience of Value Creation Model
and Strong Momentum to Drive Long-term, Sustainable Growth
Board of Directors Authorizes $7.5B Share Repurchase Program including
$5B Accelerated Share
Repurchase
CINCINNATI, Dec. 11,
2024 /PRNewswire/ -- The Kroger Co. (NYSE: KR) today
terminated its merger agreement with Albertsons after the U.S.
District Court for the District of Oregon granted the Federal Trade Commission's
request for a preliminary injunction to block the proposed merger.
After reviewing options, the company determined it is 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. 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%
TSR model over time," said Rodney
McMullen, Kroger's Chairman and CEO.
America's Grocer is Committed to Lowering Grocery Prices
& Investing in Associates
"Kroger has an extraordinary track record of investing in
America," said McMullen. "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. 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."
Kroger's ongoing investments in America include:
- $5 billion in lower prices since
2003
- $2.4 billion in incremental wage
increases on top of industry-leading benefits since 2018, a 38%
increase in average hourly rate, while growing opportunities for a
largely unionized grocery workforce
- $3.6 - $3.8 billion in annual capital investments to
build new and remodel stores, food processing and other facilities,
improve the customer experience and create additional job
opportunities
- $2.3 billion to support local
communities through charitable giving since 2017, including
$1.5 billion to feed hungry
families
"I appreciate our associates who remained focused on taking care
of our customers, communities and each other throughout the merger
process," added McMullen.
Share Repurchase Program Including Accelerated Share
Repurchases
Now that Kroger has terminated the merger agreement, the company
is ready to deploy its capacity. With its strengthened balance
sheet, Kroger will resume share repurchases after a more than
two-year pause. Since announcing the merger, Kroger used its strong
free cash flow and debt financing to build meaningful balance sheet
capacity while maintaining its investment-grade rating.
Kroger's Board of Directors approved a new share repurchase
program authorizing the repurchase of up to $7.5 billion of common stock. The new repurchase
authorization replaces Kroger's existing $1
billion authorization which was approved in September 2022. Kroger intends to enter an
accelerated share repurchase ("ASR") agreement for the repurchase
of approximately $5 billion of common
stock.
"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.
Kroger expects to continue to generate strong free cash flow and
remains committed to its capital allocation priorities including
maintaining its current investment grade debt rating, investing in
the business to drive long-term sustainable net earnings growth,
and returning excess free cash flow to shareholders via share
repurchases and a growing dividend over time, subject to board
approval.
Looking forward, Kroger plans to host an Investor Day event in
late spring of 2025 to share an update on its strategic priorities,
future growth prospects and long-term financial outlook.
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 on
August 27, 2024, that include a
special mandatory redemption provision in accordance with their
terms. The notes will be redeemed at a redemption price equal to
101% of their principal amount, plus accrued and unpaid interest
to, but excluding, the special mandatory redemption date.
Termination of Exchange Offers
In connection with the termination of the merger agreement,
Kroger has also elected to terminate its previously announced
offers to exchange (collectively, the "Exchange Offers") any and
all outstanding notes (the "ACI Notes") issued by Albertsons
Companies, Inc., New Albertsons, L.P., Safeway Inc., Albertson's
LLC, Albertsons Safeway LLC and American Stores Company, LLC
(collectively, the "ACI Issuing Entities"), for up to $7,441,608,000 aggregate principal amount of new
notes to be issued by Kroger and cash. Kroger has also elected to
terminate the related solicitation of consents (the "Consent
Solicitation" and, together with the Exchange Offer, the "Exchange
Offer and Consent Solicitation") on behalf of the ACI Issuing
Entities to adopt certain proposed amendments to the indentures
governing the ACI Notes (the "ACI Indentures").
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.
About the Exchange Offers
Global Bondholder Services Corporation served as exchange agent
and information agent for the now terminated Exchange Offer and
Consent Solicitation. You should direct questions and requests for
assistance to Global Bondholder Services Corporation at (855)
654-2015 (toll-free) or (212) 430-3774 (banks and brokers), or by
email at contact@gbsc-usa.com.
About Kroger
At The Kroger Co. (NYSE: KR),
we are dedicated to our Purpose: to Feed the Human Spirit™. We are,
across our family of companies nearly 414,000 associates who serve
over eleven million customers daily through a seamless digital
shopping experience and retail food stores under a variety
of banner names, serving America through food inspiration and
uplift, and creating #ZeroHungerZeroWaste communities. To learn
more about us, visit our newsroom and investor
relations site.
Forward Looking Statements
This press release contains
certain statements that constitute "forward-looking statements"
about Kroger's financial position and the future performance of the
company. These statements are based on management's assumptions and
beliefs in light of the information currently available to it. Such
statements are indicated by words or phrases such as "achieve,"
"committed," "confidence," "continue," "deliver," "expect,"
"future," "guidance," "model," "outlook," "strategy," "target,"
"trends," "well-positioned," and variations of such words and
similar phrases. Various uncertainties and other factors could
cause actual results to differ materially from those contained in
the forward-looking statements. These include the specific risk
factors identified in "Risk Factors" in our annual report on
Form 10-K for our last fiscal year and any subsequent filings,
as well as the following:
Kroger's ability to achieve sales, earnings, incremental FIFO
operating profit, and adjusted free cash flow goals may be affected
by: the termination of the merger agreement and our proposed
transaction with Albertsons and related divestiture plan; labor
negotiations; potential work stoppages; changes in the unemployment
rate; pressures in the labor market; changes in government-funded
benefit programs; changes in the types and numbers of businesses
that compete with Kroger; pricing and promotional activities of
existing and new competitors, and the aggressiveness of that
competition; Kroger's response to these actions; the state of the
economy, including interest rates, the inflationary,
disinflationary and/or deflationary trends and such trends in
certain commodities, products and/or operating costs; the
geopolitical environment including wars and conflicts; unstable
political situations and social unrest; changes in tariffs; the
effect that fuel costs have on consumer spending; volatility of
fuel margins; manufacturing commodity costs; supply constraints;
diesel fuel costs related to Kroger's logistics operations; trends
in consumer spending; the extent to which Kroger's customers
exercise caution in their purchasing in response to economic
conditions; the uncertainty of economic growth or recession; stock
repurchases; changes in the regulatory environment in which Kroger
operates, along with changes in federal policy and at regulatory
agencies; Kroger's ability to retain pharmacy sales from third
party payors; consolidation in the healthcare industry, including
pharmacy benefit managers; Kroger's ability to negotiate
modifications to multi-employer pension plans; natural disasters or
adverse weather conditions; the effect of public health crises or
other significant catastrophic events; the potential costs and
risks associated with potential cyber-attacks or data security
breaches; the success of Kroger's future growth plans; the ability
to execute our growth strategy and value creation model, including
continued cost savings, growth of our alternative profit
businesses, and our ability to better serve our customers and to
generate customer loyalty and sustainable growth through our
strategic pillars of fresh, our brands, personalization, and
seamless; the successful integration of merged companies and new
strategic collaborations; and the risks relating to or arising from
our proposed nationwide opioid litigation settlement, including our
ability to finalize and effectuate the settlement, the scope and
coverage of the ultimate settlement and the expected financial or
other impacts that could result from the settlement. Our ability to
achieve these goals may also be affected by our ability to manage
the factors identified above. Our ability to execute our financial
strategy may be affected by our ability to generate cash flow.
Kroger assumes no obligation to update the information contained
herein unless required by applicable law. Please refer to Kroger's
reports and filings with the Securities and Exchange Commission for
a further discussion of these risks and uncertainties.
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SOURCE The Kroger Co.
