Store Divestures Expected After Kroger's $1.7B Deal To Acquire Giant Eagle
The Kroger Co. has struck a $1.65 billion deal to buy grocery and pharmacy retailer Giant Eagle, which operates in the Midwest and Mid-Atlantic region. But keep in mind that the transaction could face regulatory scrutiny.
Under the definitive agreement, Kroger is using the assumption of $400 million in outstanding liabilities and $1.25 million in cash to fund the purchase.
Giant Eagle operates 11 pharmacies and 197 supermarkets in states including Maryland, Indiana, Pennsylvania, West Virginia and Ohio. The retailer generates about $9 billion in sales annually.
Kroger said that the appeal for Giant Eagle is over its strong selection of exclusive and fresh products, combined with customer loyalty. This all fuels a "strong foundation for growth," with opportunities noted online and in-store, according to Kroger.
"We evaluated the opportunity carefully, and the strategic fit is clear," Greg Foran, CEO at Kroger, said in a statement.
"Giant Eagle expands our reach into attractive adjacent markets, allowing us to do what we do best: Run outstanding stores, deliver fresh foods and convenient meal solutions at affordable prices, and take care of our customers and associates every single day."
The purchase comes almost two years after the Kroger-Albertsons $24.6 billion merger was blocked by the Federal Trade Commission, which would have created a combined entity with 5,000 stores, over concerns of higher prices and elimination of competition.
While the Giant Eagle deal doesn't even involve hundreds of stores, Kroger says it's still subject to regulatory approval. As a result, it expects to make "limited Giant Eagle store divestitures" in hopes of getting the green light. The deal is expected to close in 2027.
Kroger's legal counsel on the transaction is Jones Day, with RBC Capital Markets serving as the exclusive financial advisor.
Source: GlobeSt/ALM