The Kroger Co. has sold its convenience store business.
The supermarket giant has entered into an agreement to sell its 762 convenience stores to EG Group, a privately-held convenience store retailer based in the United Kingdom for $2.15 billion. The deal is expected to close transaction during the first quarter of Kroger's fiscal year.
As part of the agreement, EG Group will establish its North American headquarters in Cincinnati. The company will continue to operate the acquired stores under their established banner names.
Kroger announced in October 2017 its intention to explore strategic alternatives for its convenience store business, including a potential sale. The business generated revenue of $4 billion in 2016.
"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," said Mike Schlotman, Kroger's executive VP and CFO. "One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates. We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati."
Kroger's convenience store business operates in 18 states and includes 66 franchise operations. The stores operate under the following banners: Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop.
The EG Group has more than 2,600 sites across the U.K., France, The Netherlands, Belgium, Luxembourg and Italy. Mohsin Issa, EG Group founder and co-CEO, said the company’s entry into the U.S. market presents a “fantastic opportunity to deliver a successful retail offer to consumers across the various states.”
“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.,” he said. “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.”
Kroger plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio.