Kroger gets $17.4 billion bridge loan commitment for Albertsons buy

By Sara Rosenberg

New York, Oct. 14 – Kroger Co. has received a commitment for a $17.4 billion 364-day senior unsecured bridge loan to support its acquisition of Albertsons Cos. Inc., according to an 8-K filed with the Securities and Exchange Commission on Friday.

At closing, the company plans to fund the transaction using a combination of proceeds from new debt financing and cash on hand.

Citigroup Global Markets Inc. and Wells Fargo Securities LLC provided the bridge loan commitment.

The company has engaged with the rating agencies and is strongly committed to an investment-grade credit rating.

Kroger has already paused its share repurchase program to prioritize deleveraging following the acquisition to achieve its net leverage target of 2.5x EBITDA in the first 18 to 24 months post close.

As part of the transaction, Albertsons’ existing bonds will roll into the pro forma capital structure and rank pari passu with Kroger bonds.

Under the agreement, Albertsons is being bought for an estimated total consideration of $34.10 per share, implying a total enterprise value of $24.6 billion, including the assumption of $4.7 billion of Albertsons net debt.

In connection with obtaining the requisite regulatory clearance necessary to complete the transaction, Kroger and Albertsons expect to make store divestitures. Albertsons is prepared to establish a newly created stand-alone public company (SpinCo). Kroger and Albertsons have agreed to work together to determine which stores would comprise SpinCo, which is estimated to comprise between 100 and 375 stores, as well as the pro forma capitalization of SpinCo.

Subject to the outcome of a store divestiture process, the cash component of the $34.10 per share consideration may be reduced by the per share value of SpinCo.

Also, Albertsons will pay a special cash dividend of up to $4 billion to its shareholders. The cash component of the $34.10 per share consideration will be reduced by the per share amount of the special cash dividend, which is expected to be about $6.85 per share.

Closing is expected in early 2024, subject to the receipt of required regulatory clearance and other customary conditions, including receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Kroger is a Cincinnati-based grocery retailer. Albertsons is a Boise, Idaho-based food and drug retailer.

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