Months of speculation are finally being laid to rest: Kroger will sell the entirety of its convenience store business unit to EG Group, a U.K.-based, privately-held gas station and convenience store retailer, in a transaction valued at $2.15 billion.
"Our convenience store business has been a part of our company for many years. We want to thank our management team and associates for their enduring commitment to our customers, and for the contributions they have made to build our supermarket fuel business," said Mike Schlotman, Kroger's EVP and CFO. "As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business."
As we reported in October of 2017, Kroger announced its intent to explore “strategic alternatives” for the company’s C-store business, including a potential all-out sale in conjunction with the retailer’s Restock Kroger plan.
According to a press release, the two companies noted that EG Group will establish a North American headquarters in Cincinnati, OH as part of the agreement. EG Group will continue to operate stores formerly owned by Kroger under their established banner names—including Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb, and Quik Stop.
"This is an exciting time for EG Group, the entry into the U.S. market presents a fantastic opportunity to deliver a successful retail offer to consumers across the various states,” said Mohsin Issa, Founder and Co-CEO of EG Group. “We have had much success across Europe and we firmly believe the Kroger assets present a fantastic foundation to overlay our retail experience and know-how in the U.S. We are committed to investing in the Kroger network, partnering with leading retail brands, and working with the exceptional management team and associates transferring across to deliver a comprehensive retail offer."
"One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates," Schlotman continued. "We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati. EG Group is also a recognized international petrol forecourt convenience operator and they have a commercial model which clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust…We now look forward to working with them closely to ensure a smooth transition for associates."
Net proceeds from the sale will reportedly be used to repurchase Kroger’s shares and to lower its net total debt to adjusted EBITDA ratio. Kroger's supermarket fuel centers and its Turkey Hill Dairy were not included in the transaction, the release stated.
Will the entry of EG Group into the U.S. and a newly-streamlined Kroger make waves in the North American grocery market? Deli Market News will continue to report.