Mergers & Acquisitions

Kroger Exits the C-Store Business

Grocer completes sale of 762 units to U.K.'s EG Group

CINCINNATI -- The Kroger Co. has completed the sale of its convenience-store business unit to the U.K.'s EG Group for $2.15 billion.

"Throughout the sales process, we have been impressed with EG Group's professionalism, commitment to people and understanding of the U.S. convenience retail market," said Mike Schlotman, Kroger's executive vice president and chief financial officer. "I can't stress enough how important to our success Kroger's convenience-store management and associates have been, and we want to thank them for all of their contributions to our customers and our company."

Kroger announced in October 2017 its intention to explore strategic alternatives for its c-store business, including a potential sale, in conjunction with Restock Kroger, a plan “to redefine the food and grocery customer experience in America.” In February, Kroger and EG Group announced a definitive agreement for the sale of Kroger's convenience-store business unit to EG Group.

Included in the sale were 762 convenience stores, including 66 franchise operations, operating in 18 states and employing 11,000 associates under the following banner names: Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop. Kroger's supermarket fuel centers and its Turkey Hill Dairy were not included in the sale. EG Group will establish its North American headquarters in Cincinnati and continue to operate stores under their established banner names.

Kroger's c-store unit ranked No. 8 in a year-end update of CSP’s2017 Top 202 list of the largest c-store chains in the United States.

Share Repurchase

With the sale of the c-store unit, Kroger will see after-tax proceeds totalling $1.7 billion, the company said, and $1.2 billion of the proceeds will be used to fund an accelerated share repurchase (ASR) program.

Kroger entered into an ASR agreement April 20 with Goldman Sachs & Co. LLC., pursuant to which on April 24, 2018, Kroger will pay $1.2 billion to Goldman, which will make an initial delivery to Kroger of approximately 36.1 million Kroger common shares. The $1.2 billion ASR is an additional repurchase authorization approved by Kroger's board of directors, which is incremental to the $1 billion share repurchase program announced March 15, 2018.

Kroger will use the balance of the after-tax proceeds to lower its net total debt-to-adjusted-EBITDA ratio.

"Kroger is committed to creating shareholder value," Schlotman said. "We are returning a significant amount of capital to shareholders through a $1.2 billion accelerated share repurchase program authorized by our board of directors."

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