01—Abstract
Summary
Summary of the 8-K filed December 11, 2024. Cited figures are marked; the original filing is the authoritative source.
On December 11, 2024, The Kroger Co. delivered a notice to Albertsons Companies, Inc. terminating the Agreement and Plan of Merger dated October 13, 2022.
The termination followed a December 10, 2024 preliminary injunction from the U.S. District Court for the District of Oregon, which enjoined consummation of the merger in the FTC's suit against Kroger and Albertsons. Kroger also notified Albertsons that a December 10, 2024 termination letter from Albertsons was not effective, and that Kroger has no obligation to pay the Parent Termination Fee because Albertsons failed to perform and comply in all material respects with its covenants under the merger agreement. The accompanying press release states that Kroger determined it is no longer in its best interests to pursue the merger.
Kroger announced a new share repurchase authorization of up to $7.5 billiona of common stock, replacing its existing $1 billion authorization from September 2022, and intends to enter an accelerated share repurchase agreement for approximately $5 billion. Kroger says it will resume share repurchases after a more than two-year pause and that it remains committed to maintaining its investment-grade debt rating. Kroger will also begin the process of redeeming $4.7 billion of senior notes issued on August 27, 2024, which carry a special mandatory redemption provision, at 101% of principal plus accrued and unpaid interest.
Kroger has terminated its exchange offers and consent solicitation for Albertsons-issued notes, so the proposed amendments to those indentures will not become operative. The company plans an Investor Day in late spring 2025 to update its strategic priorities and long-term financial outlook.
02—Key points
Key Highlights
- Kroger terminated its merger agreement with Albertsons, dated October 13, 2022, after the U.S. District Court for the District of Oregon issued a preliminary injunction on December 10, 2024 in the FTC case.
- Kroger asserts it owes no Parent Termination Fee because Albertsons failed to perform and comply in all material respects with its merger agreement covenants.
- Kroger's Board authorized a new share repurchase program of up to $7.5 billion, replacing the existing $1 billion authorization from September 2022.
- Kroger intends to enter an accelerated share repurchase agreement for approximately $5 billion of common stock.
- Kroger will redeem $4.7 billion of senior notes issued August 27, 2024, that carry a special mandatory redemption provision, at 101% of principal plus accrued and unpaid interest.
- Kroger terminated its exchange offers and consent solicitation for Albertsons-issued notes, which covered up to $7,441,608,000 aggregate principal amount of new Kroger notes and cash.
- Kroger plans an Investor Day in late spring 2025 to update strategic priorities, growth prospects and long-term financial outlook.
03—Questions
Frequently Asked Questions
Why did Kroger terminate the merger with Albertsons?
The termination followed a December 10, 2024 preliminary injunction from the U.S. District Court for the District of Oregon, which enjoined consummation of the merger in the FTC's case against Kroger and Albertsons. The press release states that after reviewing options, Kroger determined it is no longer in its best interests to pursue the merger.
Will Kroger have to pay Albertsons a termination fee?
Kroger notified Albertsons that it has no obligation to pay the Parent Termination Fee because Albertsons failed to perform and comply in all material respects with its covenants under the merger agreement. The filing also states that a December 10, 2024 termination letter from Albertsons is not an effective termination.
How much stock will Kroger repurchase, and when will buybacks resume?
The Board approved a share repurchase program authorizing up to $7.5 billion of common stock, which replaces the existing $1 billion authorization approved in September 2022. Kroger intends to enter an accelerated share repurchase agreement for approximately $5 billion. The company says it will resume share repurchases after a more than two-year pause.
What happens to the Albertsons-related debt and exchange offers?
Kroger will begin redeeming $4.7 billion of senior notes issued August 27, 2024, that include a special mandatory redemption provision, at 101% of principal plus accrued and unpaid interest. Kroger also terminated its exchange offers and consent solicitation for Albertsons-issued notes, so the proposed indenture amendments will not become operative and tendered notes will be returned.
Does Kroger plan to maintain its credit rating and capital allocation priorities?
Yes. The press release states Kroger remains committed to 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 through share repurchases and a growing dividend over time, subject to board approval.
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