Kroger will fund the deal with cash and is paying a 65% premium for RNDY shares from its Tuesday closing price, reports The Wall Street Journal.
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The deal will save Kroger about $40 million but the company plans to reinvest those cost savings in the business.
Roundy’s operates retail grocery stores, was founded in 1872 and is headquartered in Milwaukee, Wisconsin.
Last year, Roundy’s exited the Minneapolis-St.
Roundy’s also had a Pick ‘n Save store at 2210 Rapids Drive but closed the underperforming store earlier this year. Roundy’s, which has about $4 billion in sales a year ago, alsooperates34 Mariano’s stores in theChicago area. One key to this “reverse synergy” is Kroger’s intention to keep Roundy’s CEO and the concept’s creator and namesake Bob Mariano on board. “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”. Kroger shares dropped 31 cents to $36.96 in morning trading. Mariano will be involved in exploring those ideas and a mix of the two approaches is most likely to happen, Kroger Chief Financial Officer Mike Schlotman told the Tribune.
Kroger would then also gain presence in new markets, like northern Wisconsin, Madison and Milwaukee as well as the Chicago area.
The company doesn’t expect to close any of the 151 stores.
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Brandon Scholz, president of the Wisconsin Grocer’s Association, says the state already has a very competitive grocery industry and the arrival of Kroger could provide the boost Milwaukee-based Roundy’s needs to bring in more customers. However, given Roundy’s protracted comp declines, the level of price as well as capital investments in both existing and new stores, and time required to stabilize and grow organic sales all add an element of uncertainty. Together, Kroger and Roundy’s will operate 2,774 supermarkets.
