Kroger Announces Definitive Agreement for Sale of Its Specialty Pharmacy Business
- None.
- None.
Insights
The sale of Kroger Specialty Pharmacy to CarelonRx signifies a strategic shift for Kroger, aiming to streamline its operations and focus on its core business segments. This divestiture allows Kroger to allocate resources and capital more efficiently, potentially enhancing its competitive position in the grocery sector. The specialty pharmacy market is highly specialized and the separation from Kroger could provide the unit with a more focused approach under CarelonRx, which specializes in healthcare services.
For Elevance Health, the acquisition expands its portfolio in a niche market, potentially increasing its market share in specialty pharmacy services. The deal may lead to improved patient outcomes through more concentrated efforts in managing complex diseases. The transaction's success hinges on seamless transition and integration, which can be challenging but is critical for maintaining service quality for patients with chronic illnesses.
The announcement of the definitive agreement is not expected to impact Kroger's 2024 financial guidance, suggesting that the specialty pharmacy business is a relatively small component of Kroger's overall revenue stream. Investors should note that the deal's closure is contingent on regulatory approvals, which introduces a degree of uncertainty. However, the strategic divestiture could be viewed positively if it leads to improved capital efficiency and a stronger focus on Kroger's main business activities.
From a financial perspective, the terms of the deal, which are not disclosed, will be important in assessing its impact on Kroger's balance sheet. The inflow from the sale could be used for various purposes such as debt reduction, reinvestment in core operations, or shareholder returns, each with different implications for the company's financial health and stock performance.
Specialty pharmacy serves patients with chronic illnesses who require complex care
"Kroger Specialty Pharmacy has been part of our company since 2012, and we want to thank our management team and associates for their enduring commitment to their patients," said Colleen Lindholz, President of Kroger Health. "As part of our regular review of assets, it became clear that our strong specialty pharmacy business unit will better meet its full potential outside of our business. One of the most important considerations was continued operations to ensure minimal disruption to our associates and patients. We are confident this transaction will help the business to grow and deliver better results for patients. We look forward to working toward a smooth transition for associates and patients."
The retailer's specialty pharmacy serves patients with chronic illness that requires complex care. Skilled clinicians and superior therapy programs allow patients and prescribers to benefit from education and resources, counseling, side effect management, financial assistance, personalized care and administrative expertise. The specialty pharmacy business supports patients facing diseases including rheumatoid arthritis, growth hormone deficiencies, multiple sclerosis and bleeding disorders.
Kroger Specialty Pharmacy is separate from other Kroger Family of Pharmacies, including in-store retail pharmacies and The Little Clinics, and therefore in-store retail pharmacies and The Little Clinics are not included in this transaction.
This transaction is subject to customary closing conditions, including regulatory approvals and is expected to close in the second half of 2024; it is not expected to have an impact on Kroger's 2024 guidance.
Advisors
RBC Capital Markets, LLC is serving as financial advisor and Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP are serving as legal advisors to Kroger.
About Kroger
At The Kroger Co., we are dedicated to our Purpose: To Feed the Human Spirit™. We are, across our family of companies nearly half a million associates who serve over 11 million customers daily through a seamless digital shopping experience and retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.
Forward Looking Statements
This press release contains certain statements that constitute "forward-looking statements" within the meaning of federal securities laws, including statements regarding the effects of the proposed transaction. These statements are based on the assumptions and beliefs of Kroger management in light of the information currently available to them. Such statements are indicated by words or phrases such as "accelerate," "anticipates," "create," "committed," "confident," "continue," "deliver," "driving," "expect," "future," "guidance," "positioned," "strategy," "target," "synergies," "trends," and "will." Various uncertainties and other factors could cause actual results to differ materially from those contained in the forward-looking statements. These include the specific risk factors identified in "Risk Factors" in Kroger's annual report on Form 10-K for the last fiscal year and any subsequent filings, as well as the following: the expected timing and likelihood of completion of the proposed transaction, including the timing, receipt and terms and conditions of any required governmental and regulatory clearance of the proposed transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the transaction agreement; the outcome of any legal proceedings that may be instituted against the parties and others following announcement of the transaction agreement and proposed transaction; the inability to consummate the proposed transaction plan due to the failure to satisfy other conditions to complete the proposed transaction; risks that the proposed transaction disrupts current plans and operations of Kroger; the ability to identify and recognize the anticipated benefits of the proposed transaction; the amount of the costs, fees, expenses and charges related to the proposed transaction; the ability of Kroger to maintain an investment grade credit rating; risks related to the potential impact of general economic, political and market factors on the companies or the proposed transaction. The ability of Kroger to achieve the goals for the proposed transaction may also be affected by its ability to manage the factors identified above.
The forward-looking statements by Kroger included in this press release speak only as of the date the statements were made. Kroger does not assume the obligation to update the information contained herein unless required by applicable law. Please refer to the reports and filings of Kroger with the Securities and Exchange Commission for a further discussion of the risks and uncertainties that affect it and it business.
View original content to download multimedia:https://www.prnewswire.com/news-releases/kroger-announces-definitive-agreement-for-sale-of-its-specialty-pharmacy-business-302091766.html
SOURCE The Kroger Co.
FAQ
What did Kroger announce regarding its specialty pharmacy business?
What chronic illnesses does the specialty pharmacy serve?
When is the transaction expected to close?
Which legal advisors are serving Kroger in this transaction?
