Kroger Completes Sale of Convenience Store Business

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Kroger Completes Sale of Convenience Store Business

04/20/2018
Kroger Completes Sale of Convenience Store Business

The Kroger Co. has completed the sale of its convenience store business unit to U.K. gasoline and convenience retailer EG Group for $2.15 billion and will use $1.2 billion to fund an accelerated share repurchase program.

Included in the sale were 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. Kroger's supermarket fuel centers and its Turkey Hill Dairy plant in Conestoga, Pa., weren't included in the sale.

EG Group will establish its North American headquarters in Cincinnati, where Kroger is located, and continue to operate stores under their established banner names.

"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, Kroger's EVP and CFO. "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."

Last October, Kroger announced its intention to explore strategic alternatives for its convenience store business, including a potential sale, in conjunction with its Restock Kroger initiative. The agreement with EG was announced in February.

Share Buyback

Additionally, Kroger has entered into an accelerated share repurchase (ASR) agreement with New York-based Goldman Sachs & Co. LLC in which Kroger will pay $1.2 billion to Goldman for an initial delivery to Kroger of approximately 36.1 million Kroger common shares. The ASR is an additional repurchase authorization approved by Kroger's board of directors, incremental to the $1 billion share repurchase program announced March 15.

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

"Kroger is committed to creating shareholder value," Schlotman said. "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."

The Kroger Co. operates 2,800 retail food stores in 35 states under a variety of banner names.

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