Kroger (KR) agreed to acquire food and pharmacy retailer Giant Eagle in a $1.65 billion deal that will expand the supermarket chain's footprint into new markets.
Kroger will pay $1.25 billion in cash and assume about $400 million in liabilities, the Cincinnati, Ohio-based grocer said Wednesday. Giant Eagle, which operates 197 supermarkets and 11 stand-alone pharmacies, generates about $9 billion in annual sales.
"Giant Eagle expands our reach into attractive adjacent markets," Kroger Chief Executive Greg Foran said in a statement.
Giant Eagle operates locations in northern Ohio, western Pennsylvania, West Virginia, Maryland and Indiana.
Kroger said it expects Giant Eagle's acquisition to be accretive to adjusted earnings per share in the second full year after completion, currently due in 2027, subject to regulatory approvals.
Last month, Kroger reported fiscal first-quarter adjusted EPS of $1.58, up from $1.49 the year before, as sales rose to $46.12 billion from $45.12 billion. The company expects full-year adjusted EPS between $5.10 and $5.30.
Meanwhile, with the Fourth of July holiday around the corner, grocers, including Kroger, are offering discounts as they compete for consumer dollars amid rising food prices.
Oppenheimer analysts said in a report last week that Kroger is implementing pricing efforts in some test markets and has seen positive results including gaining market share. Kroger's goal, the analysts said, is to capture more of the consumer basket without being the lowest-cost retailer. That, in turn, will reduce risk to margins.
Kroger said it plans to maintain its dividend and continue its $2 billion share buyback program.
Kroger's stock fell 0.7% in Wednesday trading, and has dropped nearly 12% so far this year.
Price: $54.82, Change: $-0.72, Percent Change: -1.29%
