The Kroger Co., the nation’s largest supermarket operator, has announced an $800 million deal to acquire Roundy’s. Kroger Chief Financial Officer Mike Schlotman said that Kroger hopes to achieve $40 million in cost savings once the deal closes later this year. Those cost savings won’t come from store closures or job losses at stores, according to Schlotman. Kroger currently operates 2,623 supermarkets in 34 states.
Kroger shares fell slightly after the announcement, dropping 25 cents to close at $37.03. Kroger recorded sales of $108.5 billion in 2014. Shares of Roundy’s increased 64 percent, or $1.39, to close at $3.57. Roundy’s has not turned a profit since 2013.
Roundy’s owns a large chain of Pick ‘n Save stores in its home state of Wisconsin. Those stores account for 65 percent of the company’s sales. The Roundy’s acquisition will also include 34 Mariano’s stores, a chain of upscale Chicago-area supermarkets. Mariano’s urban stores combine full-line services of a traditional grocery store with gourmet extras. Mariano’s Milwaukee-based management team will remain in charge of the day to day operations of the Mariano’s stores.
Kroger executives touted the merger as a win for all of Kroger’s chains. The acquisition will increase Kroger’s presence in the lucrative Chicago-area market, where the company currently operates 14 Food 4 Less stores. Kroger also owns the Harris Teeter and City Market grocery chains and operates 782 convenience stores, 326 fine jewelry stores and Vitacost.com, an online retailer.
Kroger has a history of successfully growing merged brands. It remains unclear if Kroger will expand the new brands it’s acquiring into other cities. According to data from Euromonitor International, Kroger’s grocery business has captured a 22 percent share of the grocery market in the United States. It’s next closest competitor, Albertson’s, controls about 16 percent of the market.
The planned merger is just the latest in the grocery marketplace. Kroger bought Harris Teeter for $2.4 billion in 2013 and was on the shortlist to buy Safeway last year, which was purchased for $9 billion by the Cerberus Group. Cerberus bought Albertsons from Supervalu for about $3 billion in 2013.