“We are excited:” Kroger, Roundy’s announce definitive merger agreement

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MILWAUKEE — It's a huge deal that may change the way you buy groceries. In an $800 million purchase, Roundy's is being bought by Kroger -- one of the largest grocery store corporations in the country. The merger is being called a positive for everyone -- from workers to customers.

Kroger

Kroger

FOX6 News found no shortage of Pick 'n Save fans at the store on Milwaukee's East Side.

"I like the prices and they have sales and I really like their sales," said one shopper.

Down the road, there is the promise that those sales could be even better with the added purchasing power now that Kroger will buy the Roundy's stores including Metro Markets and Mariano's in Illinois.

Metro Market

Metro Market

"They've got over 2,600 stores and will add 117 more in Wisconsin and 34 in Illinois to that store base. So they look at it as a partnership with us and we look at it as a partnership," said James Hyland of Roundy's Inc.

The local food workers union, which represents about 4,000 Roundy's workers in Wisconsin, tells FOX6 News the merger will be positive. Officials see no changes in working conditions -- and contracts will be honored. The same union already represents many of the Kroger workers.

As for the corporate offices in Milwaukee, Roundy's officials say they will stay, as will the current names of the stores. So Pick 'n Save will stay Pick 'n Save.

Pick 'n Save

Pick 'n Save

Financial Highlights

Kroger plans to finance the transaction with debt, and refinance Roundy's existing debt of $646 million based on market conditions. Consistent with the company's long-term commitment to returning cash to shareholders, Kroger intends to continue its quarterly dividend and share repurchase program while managing free cash flow to reduce the leverage taken on from this merger. Although the company's net debt to EBITDA ratio will increase at the time the merger closes, Kroger expects the ratio to remain in the 2.00 – 2.20 range upon closing of the merger. Kroger is committed to maintaining its current investment grade credit rating.

Kroger expects the merger to be slightly accretive to earnings in the first full year after closing, excluding merger-related expenses. The transaction will have no effect on Kroger's current long-term net earnings per diluted share growth rate of 8 – 11%, plus a growing dividend.

While Kroger expects to realize cost savings of approximately $40 million over time, the company plans to reinvest those cost savings to grow the business. Kroger has a strong history of achieving synergy goals. Being patient in achieving those goals reduces the risk of the transaction and sets the stage for sustainable growth.

Pick 'n Save

Pick 'n Save

Operational Profile

Together Kroger and Roundy's will operate 2,774 supermarkets and employ over 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, WI.

Kroger and Roundy's both strive to play a vital role in all of the communities they serve. In 2014, Kroger invested more than $280 million in local communities to provide hunger relief and support for the military and their families, breast cancer awareness programs and more than 30,000 schools and grassroots organizations.  Roundy's is similarly committed to helping communities through the Roundy's Foundation. Chartered in 2003, the Roundy's Foundation mission is to support organizations working to relieve hunger and helping families in crisis due to domestic abuse, neglect and other at-risk situations.

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