01—Abstract
Summary
Summary of the 8-K filed August 15, 2024. Cited figures are marked; the original filing is the authoritative source.
The Kroger Co. filed this Form 8-K under Item 8.01 (Other Events) to provide unaudited pro forma condensed combined financial information for its proposed Merger with Albertsons Companies, Inc. under the Agreement and Plan of Merger dated October 13, 2022.
Under the Merger Agreement, Albertsons Class A shareholders will receive $27.25a per share in cash, after adjusting for a $6.85 per share special dividend paid January 20, 2023. The estimated Merger Consideration is $15,891 million, comprising $15,778 million in cash and $113 million in non-cash consideration for converted equity awards, implying an enterprise value of $23,540 million including Kroger's assumption of approximately $7,649 million of Albertsons' remaining net debt. The pro forma information also reflects planned divestitures to C&S Wholesale Grocers LLC of 579 stores, the QFC, Mariano's and Carrs banners, the Haggen banner, eight distribution centers and other assets, for cash consideration of approximately $2,761 million.
The divestitures remain subject to customary closing conditions, including FTC clearance. The pro forma financing reflects $14,750 millionb of new indebtedness, including $4,750 million of term loans and $10,000 million of expected long-term indebtedness, along with an Albertsons notes exchange offer. The pro forma statements are presented for informational purposes only and do not include integration costs, cost savings or revenue opportunities.
For the first quarter ended May 25, 2024, pro forma net earnings attributable to The Kroger Co. were $740 millionc, or $1.00 per diluted share, compared with Kroger's historical $947 million, or $1.29 per diluted share. For the year ended February 3, 2024, pro forma net earnings attributable to The Kroger Co. were $1,312 million, or $1.78 per diluted share, compared with Kroger's historical $2,164 million, or $2.96 per diluted share. Investors should note that the pro forma figures are preliminary and that the financing assumptions could materially change pro forma interest expense and net earnings if the Bridge Facility is used instead of expected long-term debt.
02—Key points
Key Highlights
- Merger consideration to Albertsons shareholders: $27.25 per share in cash (after a $6.85 per share special dividend), totaling an estimated $15,891 million including $113 million in converted equity awards
- Implied Albertsons enterprise value of $23,540 million, including Kroger's assumption of approximately $7,649 million of net debt
- Planned divestitures to C&S Wholesale Grocers for 579 stores and related assets, with cash consideration of approximately $2,761 million
- Pro forma financing of $14,750 million in new indebtedness, including $4,750 million of term loans and $10,000 million of expected long-term debt
- Pro forma net earnings attributable to The Kroger Co. of $740 million ($1.00 per diluted share) for Q1 ended May 25, 2024, versus historical $947 million ($1.29 per diluted share)
- Pro forma net earnings attributable to The Kroger Co. of $1,312 million ($1.78 per diluted share) for fiscal year ended February 3, 2024, versus historical $2,164 million ($2.96 per diluted share)
- Pro forma figures exclude integration costs, anticipated cost savings and revenue opportunities, and are preliminary and subject to change
03—Questions
Frequently Asked Questions
What is the total consideration Kroger expects to pay to Albertsons shareholders?
The estimated Merger Consideration is $15,891 million, composed of a $15,778 million cash payment at closing and an estimated fair value of $113 million for converted Albertsons equity awards attributable to pre-combination services. Each Albertsons Class A share is to be converted into $27.25 in cash, after adjusting for the $6.85 per share special dividend paid January 20, 2023.
How will Kroger fund the cash portion of the Merger?
The pro forma financial information reflects $14,750 million of new indebtedness, consisting of $4,750 million under Term Loan Facilities (Term Loan #1 and Term Loan #2) and $10,000 million of New Financing. The filing states Kroger expects to issue $10,000 million of long-term indebtedness. If that issuance is delayed or does not occur, borrowings under the $10,650 million Bridge Facility could materially increase pro forma interest expense. Kroger estimates that using the Bridge Facility would decrease pro forma net earnings by $370 million ($281 million net of tax) for the year ended February 3, 2024.
What assets is Kroger selling to satisfy regulatory requirements?
The divestitures to C&S Wholesale Grocers LLC cover 579 stores, the QFC, Mariano's, Carrs and Haggen banners, licensing rights to the Safeway banner in Arizona and Colorado and to the Albertsons banner in California and Wyoming, eight distribution centers, two offices and certain other assets, plus several private label brands. Completion is subject to customary closing conditions, including FTC clearance and completion of the Merger. Kroger will receive approximately $2,761 million in cash consideration upon completion of the divestitures.
How does the pro forma information affect Kroger's reported earnings?
The pro forma statements combine Kroger's historical results with Albertsons' adjusted results and reflect the Merger, financing and divestitures as if they occurred at the start of the periods presented. For the first quarter ended May 25, 2024, pro forma net earnings attributable to The Kroger Co. were $740 million, or $1.00 per diluted share. For the year ended February 3, 2024, they were $1,312 million, or $1.78 per diluted share. The filing states these figures are for informational purposes only and do not represent actual results or future projections.
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