Kroger Prices $10.5 Billion of Senior Notes

Rhea-AI Summary

Kroger (NYSE:KR) has priced a $10.5 billion public offering of senior notes with various maturities ranging from 2026 to 2064. The notes have interest rates between 4.600% and 5.650%. The expected settlement date is August 27, 2024. Kroger plans to use the net proceeds to fund a portion of the cash consideration for its proposed merger with Albertsons Companies, Inc. Some notes are subject to special mandatory redemption if the merger doesn't close. If the merger is not completed, proceeds from certain notes will be used for general corporate purposes. Citigroup Global Markets Inc. and Wells Fargo Securities, are acting as lead joint book-running managers for the offering.

Positive

• Successful pricing of a large $10.5 billion senior notes offering
• Proceeds to be used for strategic merger with Albertsons Companies, Inc.
• Diverse maturity profile ranging from 2026 to 2064, providing financial flexibility

Negative

• Increase in long-term debt obligations
• Potential for special mandatory redemption of certain notes if merger doesn't close
• Additional interest expenses may impact future profitability

Insights

Financial Analyst

Kroger's $10.5 billion senior notes offering is a significant financial move to fund its merger with Albertsons. The diverse maturity dates (2026-2064) and competitive interest rates (4.6%-5.65%) suggest a strategic approach to debt management. This large-scale financing indicates Kroger's confidence in the merger's long-term value.

The special mandatory redemption clause for shorter-term notes provides a safety net for investors if the merger falls through. However, the substantial debt increase could impact Kroger's financial flexibility and credit ratings in the short term. Investors should monitor how this affects Kroger's debt-to-equity ratio and interest coverage post-merger.

Merger & Acquisition Specialist

This debt offering is a crucial step in Kroger's acquisition of Albertsons, signaling that the deal is progressing. The $10.5 billion raised will cover a significant portion of the merger's cash consideration, demonstrating Kroger's commitment to the transaction. The merger, if successful, would create a grocery powerhouse with enhanced scale and potential synergies.

However, investors should be aware of potential regulatory hurdles. The size of this combined entity might raise antitrust concerns, which could delay or potentially derail the merger. The special mandatory redemption clause for shorter-term notes reflects this uncertainty and provides some protection for noteholders.

Retail Industry Analyst

This massive debt offering underscores Kroger's ambitious growth strategy in the highly competitive grocery sector. The merger with Albertsons would significantly expand Kroger's market presence and potentially enhance its bargaining power with suppliers. This could lead to improved profit margins and a stronger competitive position against rivals like Walmart and Amazon.

However, the increased debt load could limit Kroger's ability to invest in digital transformation and store modernization in the short term. These are critical areas in the evolving retail landscape. Investors should watch how Kroger balances debt servicing with necessary investments to remain competitive in the rapidly changing grocery industry.

CINCINNATI, Aug. 20, 2024 /PRNewswire/ -- The Kroger Co. (NYSE:KR) ("Kroger" or the "Company") announced today that it has priced a public offering in an aggregate principal amount of $1.0 billion of its 4.700% Senior Notes due 2026 at a price of 99.996 percent of par (the "2026 notes"); $1.0 billion of its 4.600% Senior Notes due 2027 at a price of 99.980 percent of par (the "2027 notes"); $1.4 billion of its 4.650% Senior Notes due 2029 at a price of 99.895 percent of par (the "2029 notes"); $1.3 billion of its 4.900% Senior Notes due 2031 at a price of 99.961 percent of par (the "2031 notes"); $2.2 billion of its 5.000% Senior Notes due 2034 at a price of 99.747 percent of par (the "2034 notes"); $2.1 billion of its 5.500% Senior Notes due 2054 at a price of 99.588 percent of par (the "2054 notes"); and $1.5 billion of its 5.650% Senior Notes due 2064 at a price of 99.555 percent of par (the "2064 notes"). The expected settlement date for the offering is August 27, 2024, subject to the satisfaction of customary closing conditions.

The Company expects to use the net proceeds of the offering to pay a portion of the cash consideration for its proposed merger with Albertsons Companies, Inc. (the "Merger") pursuant to an agreement and plan of merger dated October 13, 2022 (as amended, the "Merger Agreement").  

The 2026 notes, the 2027 notes, the 2029 notes and the 2031 notes are subject to a special mandatory redemption (at a price equal to 101% of the aggregate principal amount of such series of notes plus accrued and unpaid interest to, but excluding, the date of the special mandatory redemption) under certain circumstances if the Merger is terminated or does not close by an agreed upon date. If the Merger is not completed, the Company expects to use the net proceeds of the 2034 notes, the 2054 notes and the 2064 notes for general corporate purposes.

Citigroup Global Markets Inc. and Wells Fargo Securities, LLC are acting as lead joint book-running managers for the offering.

This news release is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

This offering is being made pursuant to an automatic shelf registration statement and prospectus and a related preliminary prospectus supplement filed by the Company  with the Securities and Exchange Commission (the "SEC"). Before you invest, you should read the prospectus in the registration statement, related preliminary prospectus supplement and other documents Kroger has filed with the SEC for more complete information about Kroger and the offering. A copy of the prospectus and prospectus supplement relating to the offering may be obtained on the SEC website at www.sec.gov or from any of the underwriters by contacting:

Citigroup Global Markets Inc.
c/o Broadridge Financial Solutions
1155 Long Island Avenue
Edgewood, New York 11717
Telephone: 1 (800) 831-9146
Email: prospectus@citi.com

Wells Fargo Securities, LLC
608 2nd Avenue South, Suite 1000
Minneapolis, Minnesota 55402
Attention: WFS Customer Service
Telephone: 1 (800) 645-3751
Email: wfscustomerservice@wellsfargo.com

About Kroger

At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are, across our family of companies nearly 420,000 associates who serve over eleven 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.

Forward-Looking Statements

This press release (including information included or incorporated by reference herein) contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). These statements are based on Kroger's assumptions and beliefs in light of the information currently available to it. These statements are subject to a number of known and unknown risks, uncertainties and other important factors, including the risks and other factors discussed in the "Risk Factors" section of the prospectus and the prospectus supplement and other factors discussed in the Company's filings (and Albertsons Companies, Inc.'s filings) under the Securities Act and the Exchange Act, that could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward looking statements. Prospective investors are cautioned that such forward-looking statements are not guarantees of future performance and that actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. The Company undertakes no obligation to update any forward-looking statement.

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SOURCE The Kroger Co.

FAQ

What is the total value of Kroger's (KR) senior notes offering?

Kroger (KR) has priced a public offering of senior notes totaling $10.5 billion.

When is the expected settlement date for Kroger's (KR) senior notes offering?

The expected settlement date for Kroger's (KR) senior notes offering is August 27, 2024.

What will Kroger (KR) use the proceeds from the senior notes offering for?

Kroger (KR) plans to use the net proceeds to fund a portion of the cash consideration for its proposed merger with Albertsons Companies, Inc.

What are the interest rates for Kroger's (KR) senior notes?

Kroger's (KR) senior notes have interest rates ranging from 4.600% to 5.650%, depending on the maturity date.