Mergers & Acquisitions

Kroger's Chicago, Wisconsin Coup

With Roundy's purchase, grocer grows in underdeveloped markets

CINCINNATI and MILWAUKEE -- Following a high-profile period when it purchased many of the old Dominick's grocery-store sites in and around Chicago, sparking a fresh-food battle in the market, Roundy's Inc. is being acquired by the largest grocery chain in the country, Kroger Co.

kroger and roundys logo

"We are excited about becoming part of the Kroger Co.," said Bob Mariano, chairman of the board, president and chief executive officer of Roundy's Inc., which made a splash in the Chicago market in 2014 with its Mariano's store banner, locations that underscore fresh foods to take home and prepared on site.

"Kroger's scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace," he said. "This is a great win for our customers, communities, employees and our shareholders, and I personally look forward to continue to exceed customer and employee expectations."

Roundy's brings to Kroger an expanded footprint with a complementary base of 151 stores and 101 pharmacies in new geographies, including Milwaukee, Madison and Northern Wisconsin, which are served under the Pick 'n Save, Copps and Metro Market banners. The merger also expands Kroger's presence with an innovative store format in the Chicago area, where Roundy's operates 34 stores under the Mariano's banner. Roundy's also operates two distribution centers in Oconomowoc and Mazomanie, Wis., and a commissary in Kenosha, Wis. Roundy's had revenues of nearly $4 billion for fiscal year 2014.

Cincinnati-based Kroger Co. will purchase all outstanding shares of Roundy's for $3.60 per share in cash. The transaction price represents a premium of about 65% to the Roundy's closing share price on Nov. 10. The terms of the agreement were unanimously approved by the boards of directors of both companies.

Under the terms of the merger agreement, Kroger will commence a tender offer for all of the outstanding shares of Roundy's common stock. Any shares of Roundy's common stock not acquired in the tender offer will be acquired by Kroger in a subsequent merger. The transaction is subject to Roundy's stockholders tendering at least a majority of the outstanding shares of Roundy's common stock in the tender offer, certain regulatory approvals, and other customary closing conditions.

The transaction is expected to close before the end of the 2015 calendar year. The merger agreement contains a 30-day go-shop period, allowing Roundy's to seek a better offer.

"Mergers for Kroger always involve both parties bringing something to the table," Kroger chairman and CEO Rodney McMullen said. "We admire what Bob Mariano has done with the Mariano's banner in Chicago, where he has created an urban format that is resonating with customers, and we expect to apply Roundy's experience to our stores in urban areas around the country.

"Kroger's scale and strong financial position will enable Roundy's to reinvest in its home state of Wisconsin while continuing to grow in Chicago. Together, we are committed to investing in Roundy's people, communities, stores and merchandising to deliver a fantastic customer experience that will create opportunities for associates, grow customer loyalty and revenue, and create value for shareholders."

Together Kroger and Roundy's will operate 2,774 supermarkets and employ more than 422,000 associates across 35 states and the District of Columbia. Following closing, Roundy's will continue to operate its stores as a subsidiary of The Kroger Co. and will continue to be led by key members of Roundy's senior management team. There are no plans to close stores, and associates will have employment opportunities with both companies. Roundy's headquarters will remain in Milwaukee.

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