Kroger Announces $1.2 Billion Accelerated Share Repurchase Program Post Convenience Store Business Sale


Fri. April 20th, 2018
- by Melissa De Leon Chavez     

CINCINNATI, OH - The deal to sell Kroger’s convenience store business to EG Group wrapped up at $2.15 billion total, $1.7 billion after taxes. Following the announcement, the retailer said it will be putting $1.2 billion of the funds towards accelerating its share repurchase program.

Mike Schlotman, EVP & CFO, Kroger"Throughout the sales process, we have been impressed with EG Group's professionalism, commitment to people, and understanding of the U.S. convenience retail market," said Mike Schlotman, Executive Vice President and Chief Financial Officer. "I can't stress enough how important to our success Kroger's convenience store management and associates have been, and we want to thank them for all of their contributions to our customers and our company."

The $1.2 billion ASR is an additional repurchase authorization approved by Kroger's Board of Directors, which the retailer said is incremental to the $1 billion share repurchase program announced previously on March 15, 2018.

Kroger will use the balance of the after tax proceeds to lower its net total debt to adjusted EBITDA ratio.

Following Kroger's Convenience Store segment sale, the retailer has announced a $1.2 billion reinvestment in its share repurchase program

The retailer entered into an ASR agreement today, April 20, with Goldman Sachs & Co. LLC., pursuant to which on April 24, 2018, Kroger will pay $1.2 billion to Goldman, according to a press release. Goldman will make an initial delivery to Kroger of approximately 36.1 million Kroger common shares, while the total number of shares that Kroger ultimately will receive under the ASR will be based generally on the average of the daily volume-weighted average prices of shares traded during the term of the agreement. That agreement will remain subject to a collar provision that will establish minimum and maximum numbers of shares to be repurchased.

"Kroger is committed to creating shareholder value," said Schlotman. "We are returning a significant amount of capital to shareholders through a $1.2 billion accelerated share repurchase program authorized by our Board of Directors."

As we previously reported, the deal with EG Group resulted in the sale of 762 convenience stores, including 66 franchise operations, operating in 18 states and employing 11,000 associates under the Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb, and Quik Stop banners.

The Transition Services Agreement (TSA) Kroger has in place with EG Group will not have a material effect on its 2018 results, nor will it have any effect on Kroger's 2018 net earnings-per-diluted-share guidance.

Kroger

 
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