Albertsons' EV/EBIT ratio is then only 12. Fiscal 2021 EBIT is $2.5B, so the EBIT from Albertsons after merger is expected at $2B. Assume Albertsons divests 375 of its 2276 stores (worst-case scenario), EBIT is about 16% lower (rough estimate). Kroger is acquiring Albertsons for an enterprise value of $24.6 billion. The terms favor Albertsons shareholders as well as Kroger shareholders. Albertsons must take on debt to pay the special dividend to their shareholders. Albertsons has $3.4 billion in cash on hand, and this will not be enough to pay the special dividend of $4B. They believe the dividend should be invested in the company, even though the Board of Directors has agreed to distribute a special dividend. Several attorneys disagree on the special dividend distribution.
#SYNERGY DRINK KROGER PLUS#
14, Albertsons shares rose to $30, plus the special dividend of $4 per share constitutes the acquisition price of $34.10 per share.Īlbertsons' stock price plunged shortly after news of the acquisition because investors are skeptical about its prospects they believe the merger will not be approved under these conditions. Kroger will receive Albertsons minus 100 to 375 Albertsons stores minus the special dividend. Albertsons shareholders will receive shares in this company. 100-375 Albertsons stores will be spun off and incorporated into a spinoff company.7, 2022 to shareholders of record as of the close of business on Oct. Albertsons shareholders will receive $6.85 special dividend, payable on Nov.Kroger will pay Albertsons shareholders $34.10 per share.Albertsons will be acquired for a total enterprise value of $24.6 billion. dollars)* (Statista)įor shareholders, this means the following: Sales of the leading food and grocery retailers in the United States in 2021 (in billion U.S. Consolidated sales of both companies will be about $210 billion. Albertsons' food and drug stores are not located in areas where Kroger operates, so this will ensure better geographic sales distribution. The acquisition will create strong synergies, reducing costs and giving both companies a strong competitive advantage over competitors. Albertsons is a well-known food and drug store in the United States and posted sales of $72B in 2021. 14, 2022, Kroger announced its intention to merge with Albertsons. Merger with Albertsons Is A Strong Catalyst For Kroger Adjusted net earnings per diluted share are expected at $3.95 to $4.05, representing growth of about 9% YoY. Kroger raised its full-year outlook, expecting identical sales excluding fuel to grow 4% to 4.5% YoY. Key Initiatives Drive Strong Q2 Results (2QFY23 Investor Presentation) Now share repurchases are paused ahead of the planned acquisition to reduce debt. 9, the Board authorized a new $1B share repurchase program.
#SYNERGY DRINK KROGER FREE#
Free cash flow of $640 million during the quarter enabled Kroger to repurchase $309 million of shares and distribute $153M in dividends. Non-GAAP EPS came in at $0.90, up 12.5% year over year. Excluding fuel, sales increased 5.2% compared to the same period last year.
Identical sales of Kroger brands were up 10.2% and digital sales were up 8%. The second quarter investor presentation showed strong growth of 5.8% in identical store sales.
#SYNERGY DRINK KROGER FULL#
Kroger Raised Full Year Outlookįirst, let’s take a look at the second quarter results. The company is shareholder-friendly, making the stock a buy. After all, Kroger’s valuation has become favorable and its prospects remain excellent. The recent decline provides an opportunity to take a closer look at the stock. Its 10-year total return averages 13.6% per year, compared to the S&P500's total return of 10.0%. Kroger is a stock that has shown high total returns over the past 10 years. This puts Kroger in position 17 in Berkshire's stock portfolio. Currently, as of the last report, it still owns about 50M shares, representing a total value of about $2.2B. Since then, Berkshire has been gradually reducing the position. The attractively valued share price makes it an interesting stock to investigate.įurthermore, Warren Buffett's Berkshire Hathaway ( BRK.A, BRK.B) bought Kroger until the second quarter of 2021, owning some 28M shares. However, parts of the deal are being held up by lawsuits, such as Albertsons' pre-merger special dividend distribution. The combined company should benefit greatly from synergy and geographic sales diversification. The merger is an interesting opportunity to allow Kroger to grow its business. ( NYSE: KR) plans to acquire Albertsons Companies, Inc.
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