UK-Based EG Group to Purchase Kroger’s 762 Convenience Stores for $2.15 Billion

Cincinnati and Blackburn, U.K. — The Kroger Co. and EG Group, a privately-held petrol forecourt convenience store retailer based in Blackburn, Lancashire, U.K., have agreed to the sale of Kroger's convenience store business unit to EG Group for $2.15 billion. The companies expect to close the transaction during the first quarter of Kroger's fiscal year.

As part of the agreement, EG Group will establish its North American headquarters in Cincinnati, where Kroger is based, and continue to operate stores under their established banner names.

Kroger announced in October 2017 its intention to explore strategic alternatives for its convenience store business, including a potential sale, in conjunction with Restock Kroger.

"Our convenience store business has been a part of our company for many years. We want to thank our management team and associates for their enduring commitment to our customers, and for the contributions they have made to build our supermarket fuel business," says Mike Schlotman, Kroger's executive vice president and chief financial officer. "As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business."

"One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates. We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati. EG Group is also a recognized international petrol forecourt convenience operator and they have a commercial model which clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust," says Schlotman. "This is good for our associates across the country and for our headquarter city of Cincinnati. Throughout the process we were impressed with the EG Group's professionalism, investment commitment and more importantly their understanding of the U.S. convenience retail market. We now look forward to working with them closely to ensure a smooth transition for associates."

"This is an exciting time for EG Group,” says Mohsin Issa, EG Group’s founder and co-CEO. “The entry into the U.S. market presents a fantastic opportunity to deliver a successful retail offer to consumers across the various states. We have had much success across Europe and we firmly believe the Kroger assets present a fantastic foundation to overlay our retail experience and know-how in the U.S. We are committed to investing in the Kroger network, partnering with leading retail brands and working with the exceptional management team and associates transferring across to deliver a comprehensive retail offer."

Kroger plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.

Kroger's convenience store business operates in 18 states. It includes 66 franchise operations. The stores operate under the following banner names: Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop. Kroger's convenience store business generated revenue of $4 billion, including selling 1.2 billion gallons of fuel, in 2016.

Kroger's supermarket fuel centers and its Turkey Hill Dairy are not included in the sale.

The transaction is subject to customary closing conditions, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The company expects the transaction to close quickly as EG Group has no U.S. presence today.

Goldman Sachs & Co. LLC is acting as exclusive financial advisor to Kroger and Weil, Gotshal & Manges LLP is acting as legal advisor to Kroger.

Morgan Stanley, Bank of America Merrill Lynch and Barclays are acting as financial advisors to EG Group. Allen & Overy is acting as legal advisor to EG Group.

 

SOURCE: The Kroger Co.

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