CINCINNATI -- The Kroger Co. is denying published reports that the grocery and convenience store company is planning to sell out to a private-equity firm. The Wall Street Journal on Friday said a number of firms have been eyeing Kroger on the expectation that the company will soon begin exploring a leveraged buyout with the help of investment bank Goldman Sachs Group Inc.
In a letter to employees, David B. Dillon, chairman and CEO of Kroger, denied the report, saying, I want you to know neither management nor our Board of Directors has any interest in pursuing a leveraged [image-nocss] buyout transaction. [Click here to read the complete letter.]
Headquartered in Cincinnati, Kroger operates, either directly or through subsidiaries, 2,468 supermarkets and department stores in 31 states under two-dozen banners including Kroger and Kroger Marketplace, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's and Smith's Marketplace, Fry's and Fry's Marketplace, Dillons, QFC and City Market. It also operates, either directly or through subsidiaries, franchise agreements, or operating agreements, 779 c-stores operating under several banners, and 631 supermarket fuel centers, among other businesses.
The company's c-stores are in 16 states: Loaf N Jug in Colorado, New Mexico, Nebraska, Montana, North Dakota, Oklahoma, South Dakota and Wyoming; Turkey Hill Minit Markets in Pennsylvania, Tom Thumb Food Stores in Florida and Alabama; Kwik Shop Inc. in Illinois, Iowa, Kansas and Nebraska; and Quik Stop Markets Inc. in California and Nevada.
Kroger carries a market capitalization of more than $20 billion, according to the Journal.
It remains unclear whether such expectations will pan out, said the newspaper, which cited anonymous people familiar with the matter. It added that the market for leveraged takeovers has been whipped into a frenzy in the past few years, as many public companies have been subject to buyout rumors. But the specificity of discussions around Wall Street suggests there is a lot of behind-the-scenes movement around the grocer.
Kroger is among a small group of supermarket companies that also operate c-stores beyond just their own grocery store fueling centers. The other major company is Marsh Supermarkets Inc., Indianapolis, which was purchased in late September 2006 by Sun Capital Partners, Boca Raton, Fla., for $325 million after a contentious process that included a competing offer that landed the deal in court. The purchase included Marshs approximately 150 Village Pantry c-stores.
And Dutch retail giant Royal Ahold announced last November that its Tops Markets LLC U.S. supermarket subsidiary was up for sale. In June 2005, Royal Ahold completed the sale of Ahold USAs chain of 198 Wilson Farms and Sugarcreek c-stores, part of Tops Markets, to Wilson Farms Inc., Buffalo, N.Y., the local acquisition team of WFI Acquisition Inc., a corporation formed by Nanco Enterprises Inc. and Bruckmann, Rosser, Sherrill & Co Inc. Tops had owned Wilson Farms since 1969. Ahold decided to sell off the c-store chain as part of a strategy to focus on traditional supermarkets.
A Buffalo News report last week said that a buyer has yet to emerge for Tops. Golub Corp., which runs Schenectady, N.Y.-based Price Chopper, showed some interest, but has not made a move. The most likely scenarios for Tops involve either another chain acquiring all or part of Tops or a private equity buyer stepping in, said the report.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.