Kroger (NYSE:KR) will buy Roundy's for roughly $800 million in cash, bringing the company closer to becoming the first national grocery chain in the United States.
Combined with Roundy's, Kroger will operate 2,774 supermarkets and employ more than 422,000 associates across 35 states and the District of Columbia. It also takes Kroger into entirely new markets.
The agreement has Kroger paying $3.60 per outstanding share, in cash. That's a hefty premium, approximately 65 percent more than Roundy's closing share price on Nov. 10. Roundy's had revenues of nearly $4 billion for the fiscal year 2014.
"We are delighted to welcome Roundy's to the Kroger family," said Rodney McMullen, Kroger's chairman and CEO. "With a team of 22,000 talented associates, outstanding store locations, and a shared commitment to putting customers first, we are excited about Roundy's future growth."
Of particular interest to Kroger is Roundy's Mariano's banner in Chicago. Mariano's acquired 13 former Dominick's stores in 2013 from Safeway, and has been rapidly expanding. Kroger doesn't have a presence in the Chicago market save for a handful of Food 4 Less stores on the south and west sides of the city.
Roundy's has 34 stores in the Chicago area under the Mariano's banner.
But Mariano's has quickly won market share in some of the more affluent areas, competing head to head with Whole Foods. It's an attractive position for Kroger.
"Mergers for Kroger always involve both parties bringing something to the table," 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."
Roundy's brings to Kroger an expanded footprint with a complementary base of 151 stores and 101 pharmacies in new geographies for the Cincinnati-based company, including Milwaukee, Madison and Northern Wisconsin under the Pick 'n Save, Copps and Metro Market banners. Roundy's also operates two distribution centers and a commissary in Wisconsin.
The transaction is expected to close by the end of the 2015.
-See this Kroger press release
Kroger tests out 'smart shelf' technology
Kroger launches international private brand
Kroger, Liberty Mutual partners for loyalty program
Kroger thriving, expanding in center store
Kroger CIO envisions big tech changes across the enterprise