EG Group, a privately-held gas station and convenience store retailer in Blackburn, Lancashire, United Kingdom, has agreed to buy the Kroger Co.'s convenience store business for $2.15 billion. Under terms of the agreement, EG Group will establish its North American headquarters in Cincinnati and will continue to operate stores under the established banner names.
Kroger announced plans to explore strategic alternatives for its convenience store business last October as part of its Restock Kroger cost savings plan. With $4 billion in total sales in 2016, the business includes 784 convenience stores in 18 states under banner names Turkey Hill Minit Markets, Loaf ‘N Jug, KwikShop, Tom Thumb and QuickStop.
|J. Michael Schlotman, executive vice-president and c.f.o. of Kroger|
“One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates,” said J. Michael Schlotman, executive vice-president and chief financial officer of Kroger. “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 that clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust. This is good for our associates across the country and for our headquarter city of Cincinnati. Throughout the process we were impressed with the EG Group’s professionalism, investment commitment and more importantly their understanding of the U.S. convenience retail market. We now look forward to working with them closely to ensure a smooth transition for associates.”
Kroger said it plans to use net proceeds from the sale to repurchase shares and to lower its net total debt to adjusted EBITDA ratio. The transaction is expected to close in the first quarter of Kroger’s fiscal year and remains subject to customary closing conditions.
The EG Group has more than 2,600 sites across the U.K., France, The Netherlands, Belgium, Luxembourg and Italy. The company secured approximately 1,000 gas station assets from Esso in Germany, which will be integrated into its network in the fourth quarter of 2018. With the addition of the Kroger assets, EG Group will own and operate approximately 4,400 sites across Europe and the United States.“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-chief executive officer 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.”