Kroger to acquire Roundy’s in $800 million deal
Acquisition to be completed by year’s end; headquarters to stay in Milwaukee

By Katherine Michalets - Freeman Staff

Nov. 13, 2015

The Pick 'n Save store in The Shoppes at Fox River. Kroger is buying Roundy's, the parent company of Pick 'n Save.
Charles Auer/Freeman Staff

MILWAUKEE - As the southeastern Wisconsin grocery store market continues to evolve with the addition of new players, The Kroger Co. announced Wednesday it will acquire Milwaukee-based Roundy’s Inc. in a roughly $800 million deal.

By acquiring Roundy’s with 151 stores in Wisconsin and 34 Mariano’s locations in the Chicago area, Kroger will increase its Midwest footprint and extend its reach into Wisconsin.

“We are delighted to welcome Roundy’s to the Kroger family,” said Rodney McMullen, Kroger’s chairman and chief executive officer, in a statement. “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.”

As part of the deal which was approved by each company’s board of directors, Roundy’s shareholders will receive $3.60 per share in cash. The transaction price represents a premium of approximately 65 percent to the Roundy’s closing share price Tuesday, according to the announcement.  The purchase price also includes refinancing Roundy’s debt, which is $646 million. The transaction is expected to be completed by the end of the year.

“We are excited about becoming part of The Kroger Co. Kroger’s scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace,” said Robert A. Mariano, chairman of the board, president and chief executive officer of Roundy’s, in a statement. “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.”

Roundy’s currently operates 151 stores and 101 pharmacies in the Milwaukee, Madison and northern Wisconsin areas under the names of Pick ‘n Save, Copps and Metro Market. Roundy’s also operates two distribution centers in Oconomowoc and Mazomanie and a commissary in Kenosha. Roundy’s had revenues of nearly $4 billion for fiscal year 2014, according to the announcement.

Together, Kroger and Roundy’s will operate 2,774 supermarkets and employ more than 422,000 associates across 35 states and the District of Columbia. Following the completion of the purchase, Roundy’s will continue to operate its stores as a subsidiary of The Kroger Co. and will be led by members of Roundy’s senior management team. There are no plans to close stores, and associates will have employment opportunities with both companies. Roundy’s headquarters will remain in Milwaukee as part of the deal, according to the announcement.

“Mergers for Kroger always involve both parties bringing something to the table,” McMullen said in the statement. “We admire what Bob Mariano has done with the Mariano’s banner in Chicago, where he 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. Kroger’s scale and strong financial position will enable Roundy’s to reinvest in its home state of Wisconsin while continuing to grow in Chicago.”

According to the announcement, Cincinnati-based Kroger anticipates cost savings of about $40 million over time. It intends to reinvest those cost savings to grow the business.

Brandon Scholz, president and CEO of Wisconsin Grocers Association, said the reaction to the acquisition on Wednesday had been positive, largely because of the good reputations that Roundy’s and Kroger have developed.

Scholz said Kroger may bring back some of the market share for Roundy’s stores and the company has committed to maintaining operations in Milwaukee.

“It’s a positive signal from Kroger on how they are going to approach this,” Scholz said. “They have a real strong track record.”

Wisconsin consumers have shown that they appreciate grocery choices, Scholz said. He thinks Kroger will keep Roundy’s stores operating similarly to how they operate now because Kroger’s history has not been to “knock it down and change it.”

“I don’t think you are looking at much change,” he said.