The Kroger Co. (NYSE:KR) entered into a definitive agreement to acquire Albertsons Companies, Inc. (NYSE:ACI) from a group of shareholders for $18.7 billion on October 13, 2022, Under the terms of the transaction, Kroger will acquire all of the outstanding shares of Albertsons Companies common and preferred stock for $34.10 per share, implying a total enterprise value of approximately $24.6 billion, including the assumption of approximately $4.7 billion of Albertsons Cos. net debt. The per share cash purchase price payable to Albertsons Cos. shareholders in the merger would be reduced by an amount equal to (i) three times four-wall adjusted EBITDA for the stores contributed to SpinCo divided by the number of Albertsons Cos. common shares (including common shares issuable upon conversion of Albertsons Cos.' preferred stock) outstanding as of the record date for the spin-off plus (ii) the per share amount of a special pre-closing cash dividend of up to $4 billion payable to Albertsons Cos. shareholders, which is expected to be approximately $6.85 per share. Kroger intends to fund the transaction using a combination of cash on hand and proceeds from new debt financing. Kroger has $17.4 billion of fully committed bridge financing in place from Citi and Wells Fargo. Pursuant to the Merger Agreement, Merger Sub will merge with and into Albertsons with Albertsons surviving the Merger as the surviving corporation and a direct, wholly owned subsidiary of Kroger (the “Surviving Corporation”). Following the close of the transaction, Rodney McMullen will continue to serve as Chairman and Chief Executive Officer and Gary Millerchip will continue to serve as Chief Financial Officer of the combined company. Kroger will pay a termination fee of $600 million to Albertsons in case Kroger terminates the transaction, and Albertsons will pay a fee of $318 million to Kroger in case Albertsons terminates the transaction.

The transaction is subject to the receipt of required regulatory clearance and other customary closing conditions, including receipt of clearance under the Hart-Scott-Rodino Antitrust Improvements Act. The transaction has been unanimously approved by the board of directors of each company. The transaction has been approved by majority Albertsons shareholders. Albertsons shareholders holding more than a majority of common stock have either delivered a written consent or committed to delivering a written consent approving the transaction no later than October 18, 2022 and Albertsons shareholders holding more than a majority of Albertsons preferred stock have already approved the transaction. No further action by Albertsons shareholders will be needed or solicited in connection with the merger. Cerberus Albertsons Incentive LLC, Cerberus Iceberg LLC, Lubert-Adler Partners, LP, Klaff Realty, LP and KRS ABS, LLC, collectively the beneficial owners of approximately 296.08 million shares of Common Stock, which constitute approximately 55.4% of the voting power of the outstanding shares of Common Stock of ACI, each executed a support agreement. As on November 1, 2022, U.S. Senator Maria Cantwell and Patty Murray sent a letter to Federal Trade Commission (FTC) Chair Lina Khan to express concern about the pending acquisition. They emphasized that the merger could undercut market competition and result in store closures that force worker layoffs. They also expressed concern over Albertsons' recent announcement of approximately $4 billion in cash dividends to shareholders. The cash dividend could adversely impact the ability of Albertsons to keep its stores open and its workers employed should the merger with Kroger not be approved. On November 1, 2022, Attorney General Bob Ferguson filed a lawsuit to block Albertson from enriching its shareholders with a $4 billion payout before a proposed merger with Kroger can be reviewed by state and federal antitrust enforcers. The special dividend payment risks severely undercutting its ability to compete during the lengthy time period government regulators including Washington will be scrutinizing the merger. If granted, the restraining order will block Albertsons from making the dividend payment while Ferguson's lawsuit is ongoing. As of November 3, 2022, Albertsons Companies announced that the Attorney General of the State of Washington has been granted a temporary restraining order by a commissioner assistant to the Judge. The TRO restrains the Company from paying the previously announced $6.85 per common share Special Dividend, originally scheduled to be paid on November 7, 2022. As of November 8, 2022, the U.S. District Court for the District of Columbia has denied the request by the California, Illinois and District of Columbia Attorneys General for a temporary restraining order. This order, which restrains the Company from paying the Special Dividend, remains in effect until November 10, 2022, unless within that time, an order is entered extending or dismissing the temporary restraining order. The Order enables the Court to consider the merits at a hearing scheduled for November 10, 2022. The court order was extended to November 17, 2022 and has been extended again to December 9, 2022. As on December 1, 2022, California Attorney General Rob Bonta today, along with the attorney generals of the District of Columbia and Illinois, filed a motion for a preliminary injunction to block Albertsons' planned $4 billion payment of a "special dividend" to shareholders. Agreement has been reached wherein Albertsons would pay the dividend at the beginning of the merger review, as per state officials. As of December 8, 2022, Attorney General Phil Weiser also has filed a brief to block Albertsons from paying its shareholders a $4 billion dividend before regulators review the merger. As on December 9, 2022, Albertsons Companies announced that the Washington State Court has denied the request for a preliminary injunction by the Attorney General of the State of Washington against the previously announced $6.85 per common share Special Dividend originally scheduled to be paid on November 7, 2022, to stockholders of record as of the close of business on October 24, 2022. The Washington State Court has extended the existing temporary restraining order till December 19, 2022, to give the Attorney General of the State of Washington an opportunity to appeal today's ruling. The transaction is expected to close in early 2024. The transaction is expected to be accretive to earnings in the first full year following closing and be double-digit accretive to earnings by year 4.

Citigroup Inc. and Wells Fargo Securities, LLC acted as financial advisors, and Annemargaret Connolly, Chantale Fiebig, Daniel S. Dokos, Dennis F. Adams III, Evan R. Levy, Jeffrey D. Osterman, Joe Pari, Megan Pendleton, Merritt S. Johnson, Michael J. Aiello, Paul J. Wessel, Regina Readling, Sachin Kohli, John O'Loughlin, Thomas D. Goslin, Timothy C. Welch, Olivia J. Greer, Christina A. De Vuono, Jessie Chiang, Blake Bitter, Carolyn Stoner, Rebecca Sivitz of Weil, Gotshal & Manges LLP and Arnold & Porter Kaye Scholer LLP acted as legal advisors to Kroger. Goldman Sachs & Co. LLC and Credit Suisse Securities (USA) LLC acted as financial advisors and fairness opinion provider to Albertsons. Kevin T. Collins, Alexander J. May and Edward L. Prokop of Jenner & Block LLP, White & Case LLP and Ted Hassi of Debevoise & Plimpton LLP acted as legal advisors to Albertsons. Phillip R. Mills and Cheryl Chan of Davis Polk & Wardwell LLP acted as legal advisors to Citigroup Inc. and Wells Fargo Securities, LLC in this transaction. Stuart Rogers of Alston & Bird LLP acted as legal advisor to Credit Suisse Securities (USA) LLC. Stuart Freedman, Michael Swartz, and Jeffrey Symons of Schulte Roth & Zabel LLP provided legal counsel to Cerberus Capital Management. Mark Thierfelder and Eric Siegel of Dechert LLP acted as legal advisor to Cerberus Capital Management, L.P.