Roundy's Reveals Details on its Merger with Kroger

Thu. November 19th, 2015 - by Jessica Donnel

MILWAUKEE, WI - In a new SEC filing submitted by Roundy’s Supermarkets, the company has detailed the developments behind its recent merger with Kroger ever since the deal was first explored in 2011. The filing also offered some insight into other companies Roundy’s pursued before ending up with Kroger, as well as how its struggling financial results affected the company’s decision to merge. 

Starting in February 2011, the filing reveals, Roundy’s conducted an auction process in which it contacted 23 unnamed strategic buyers, including Kroger, and 46 financial sponsors in an attempt to sell the Company. While nine potential buyers submitted preliminary indications of interest, Roundy’s ultimately decided to pursue an initial public offering instead, going on the New York Stock Exchange as of February 17, 2012. 

Mariano's. Photo Credited to Popai.

Talks between Kroger and Roundy’s were once again sparked in early August when Kroger CEO Rodney McMullen and CFO Michael Schlotman requested a meeting with Roundy’s CEO Robert Mariano and CFO Michael P. Turzenski about a potential takeover. A preliminary offer of $3.10 to $3.40 per share, or $150 million to $165 million for all of Roundy’s shares came from Kroger later that month, but was rejected.

The talks resurfaced in late September after Roundy’s met with investors, the filing explains, with investors pushing for a higher purchase price. Dealings reportedly continued until an October 14th conference call with investors, where Turzenski revealed that its Q3 financial report would likely fall well below expectations. The Board then informed Roundy’s advisors that it would consider entering into exclusive negotiations if Kroger provided a specific purchase price that was acceptable.

Following that call, Kroger and BofA Merrill Lynch presented Roundy’s with an offer of $3.55 per share, subject to a 21-day period of exclusivity to complete due diligence and finalize negotiations, but on October 21st, Roundy’s board asked for yet another price raise in exchange for exclusive negotiations. Kroger then raised its offer $3.60 per share the same day, offering Roundy’s a “go-shop” period in which the company could seek higher offers from other potential merger subjects. 

On October 26, Roundy’s and Kroger worked out the initial draft of their “Agreement and Plan of Merger Agreement,” which detailed a termination fee of $20 million payable by the Roundy’s if the Merger Agreement was terminated pursuant to a superior proposal submitted during the go-shop period (or a fee of $25 million if the Merger Agreement was terminated after the go-shop period).

Mariano's (Image Source: Gilbert R. Boucher II, Daily Herald)

As we’ve previously reported, Roundy’s and its advisors agreed to the deal on November 11 and announced the deal the following morning. While the filing stipulates that the “go shop” period expires on December 10th, Kroger’s tender offer has already commenced.

For more information of this pending merger as it comes, check back with AndNowUKnow as we bring you the latest.

Roundy's Kroger