Kroger Co. said Feb. 5 it has agreed to sell its convenience store business, comprising 762 stores in 18 states, for $2.15 billion to EG Group, a privately held U.K. company.
The food retailer in a joint statement with EG Group said proceeds from the deal would be used to repurchase shares and to pay down debt. The transaction is expected to close during Kroger's fiscal first quarter ending in May.
The sale is part of the Cincinnati-based company's transformation plan, dubbed Restock Kroger. Unveiled in October 2017, the plan targets creating shareholder value.
Kroger's convenience stores employ 11,000 workers, sold 1.2 billion gallons of fuel and generated $4 billion in sales in 2016, Kroger said. The network operates under banners such as Turkey Hill Minit Markets, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop. Kroger said its supermarket fuel centers and its Turkey Hill Dairy are not included in the sale.
As part of the deal, EG Group plans to establish its U.S. headquarters in Cincinnati and continue to operate the stores under their established brands.
EG Group operates about 2,600 fuel stations and convenience stores in the U.K., France, the Netherlands, Belgium, Luxembourg and Italy. It agreed in 2017 to acquire about 1,000 fuel stations in Germany from Esso, part of ExxonMobil, which are due to be transferred and integrated into the EG Group network in the fourth quarter.
EG Group, founded in 2001 and based in Blackburn, England, operates brands including Esso, BP, Shell, Carrefour, Starbucks, Burger King and KFC. Following the acquisition of the Esso and Kroger assets, it will operate about 4,400 sites and estimates its pro forma annual revenue at $18.5 billion.
"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.," EG Group founder and co-CEO Mohsin Issa said in the joint statement. "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."
Bank of America Merrill Lynch, Morgan Stanley and Barclays are acting as financial advisers to EG Group. Allen & Overy is acting as legal adviser.
Goldman Sachs & Co. is acting as exclusive financial adviser to Kroger and Weil, and Gotshal & Manges LLP is legal adviser.
