Kroger to Acquire Roundy's Chain for $178 Million

Wed. November 11th, 2015 - by Melissa De Leon Chavez

CINCINNATI, OH & MILWAUKEE, WI - Kroger is cracking into yet another new market as the company continues to widen its footprint in the retail sector. This time, however, the chain has acquired the established Roundy’s banner rather than putting new stores in the state of Wisconsin.

Rodney McMullen, Chairman & CEO, Kroger CO.

In a one-on-one interview with CNBC, Rodney McMullen, Kroger's Chairman and Chief Executive Officer, McMullen addressed the decision to buy into the market and build from there with the viewpoint that Roundy’s is already established in the market share.

“Part of our strategy in going to a new market is fill in, we think this is a much more efficient way to go into a new market and [Roundy’s] really has a great market share already.”

Today’s TMJ4 reported that though Kroger is acquiring Roundy’s for about $178 million, it valued the deal at around $800 million, including debt. Kroger stated in the release that it will pay approximately 65 percent premium over its closing price for each share.

McMullen said in a press release that he was delighted to welcome Roundy's to the Kroger family. "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."

With this latest addition, Kroger inherits 151 stores and 101 pharmacies in new regions, including Milwaukee, Madison, Northern Wisconsin, under the Pick 'n Save, Copps, and Metro Market banners, plus two Wisconsin-based distribution centers.

Kroger also stated that this transaction will add an innovative store format in the Chicago area, where Roundy's operates 34 stores under the Mariano's banner. Roundy's had revenues of nearly $4.0 billion for fiscal year 2014.

McMullen said that Kroger admires what President and CEO Robert A. Mariano has done with the Mariano’s banner in Chicago, and that together with Kroger’s scale and strong financial position they will be able to both reinvest in Roundy’s Wisconsin home and Chicago.

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

“[Mariano] 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,” McMullen said, adding that any merger Kroger goes into involves both parties bringing something to the table.

The feeling appears to be a mutual one.

Robert A. Mariano, President and CEO, Roundy's"We are excited about becoming part of The Kroger Co.,” Mariano said, explaining that Kroger's scale, knowledge, and experience will make Roundy’s a more formidable competitor in the marketplace by allowing it to accelerate the strategic initiatives it has invested in previously. “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.”

The Boards of Directors of both companies agreed unanimously to the terms, stating that the transaction is expected to close before the end of 2015's calendar year.

Kroger Co. Roundy's