Mariano's Sold to Kroger in Supermarket Superdeal

Kroger plans to buy out Roundy’s grocery stores, including the Mariano’s chain, for $3.60 a share, a total purchase price of about $178 million, the company announced Wednesday.

The deal could close by the end of the year. Kroger will take on $646 million in Roundy’s debt, bringing the value of the deal to $800 million. In the quarter ended July 4, Roundy’s lost $1.4 million and the business overall was not in good financial shape. The company lost more than $300 million in 2014.

Roundy’s, headquartered in Milwaukee, owns 150 stores in Illinois and Wisconsin, including manyMariano’s stores that opened in the Chicago area within the last three years. The Mariano’s expansion, now numbering 34 stores, has been one of the company’s brightest achievements.

“We admire what Bob Mariano has done with the Mariano’s banner in Chicago, where he has created an urban format that is resonating with customers and we expect to apply Roundy’s experience to our stores in urban areas around the country,” said Rodney McMullen, Kroger’s chairman and chief executive officer. “Kroger’s scale and strong financial position will enable Roundy’s to reinvest in its home state of Wisconsin while continuing to grow in Chicago.

“Together, we are committed to investing in Roundy’s people, communities, stores and merchandising to deliver a fantastic customer experience that will create opportunities for associates, grow customer loyalty and revenue, and create value for shareholders.”

Kroger said the company has no plans to cut staff at the acquired grocery stores, and no store closings are expected. Bob Mariano, chief executive officer of Roundy’s, Inc., will remain with the newly merged company.

Mariano’s stores are in Elmhurst, Wheaton, Aurora, Frankfort, Oak Lawn, Western Springs, Shorewood, Park Ridge, Vernon Hills, Palatine, Skokie, Evergreen Park, Northbrook, Glenview, Buffalo Grove and Chicago, among other towns. A new store is under construction in Orland Park, and one is planned for Naperville.

Roundy’s also owns Copps, Metro Market and Pick ‘n Save stores.

“The thing that we will be able to do over time is obviously we have more financial resources than Roundy’s had, so we’ll be able to invest in the market more aggressively, and over time the customer will see that,” McMullen told the Milwaukee Journal Sentinel in an interview.

Kroger, with sales last year of $108 billion, operates more than 2,300 stores in 34 states. Together, the grocery chain will employ more than 422,000 people, according to Kroger. The company is based in Cincinnati.

“We are excited about becoming part of The Kroger Co.,” Mariano said in a statement. “Kroger’s scale, knowledge and experience allows us to accelerate the strategic initiatives we have invested in and makes us a more formidable competitor in the marketplace. This is a great win for our customers, communities, employees and our shareholders, and I personally look forward to continue to exceed customer and employee expectations.”

Kroger says the newly acquired chains will be operated independently but benefit from Kroger’s scale, buying power and ability to invest in expansion. That could mean more Mariano’s stores will be built.

After the deal was announced, shares of Roundy’s jumped $1.40 to $3.58. Kroger shares dropped 31 cents to $36.96 in morning trading.

The transaction price represents a premium of approximately 65 percent to the Roundy’s closing share price on Nov. 10, 2015. The terms of the agreement were unanimously approved by the Boards of Directors of both companies. The transaction is not subject to any financing conditions.

Bob Mariano’s shares of Roundy’s stock will be worth $6.1 million at Kroger’s offered price.

Bert P. Flickinger, managing director of Strategic Resource Group, told the Journal Sentinel this is a great deal.

“This is the best early Christmas present that the vendors who depend on the company and the team members who work in the company could have,” Flickinger said. “Kroger is the best-led retailer of any kind in the U.S. It can compete effectively in the range from Walmart to Whole Foods to Costco.”