Kroger said Wednesday that it plans to buy fellow grocer Roundy's for about $178 million to expand in the Midwest.
Roundy's Inc. owns about 150 stores in Wisconsin and Illinois. Its shops include Copps, Mariano's, Metro Market and Pick 'n Save.
Cincinnati-based Kroger said the deal will give it a presence in new areas. Kroger Co. operates more than 2,600 stores in 34 states. It owns several supermarket chains, including City Market, Ralphs and Harris Teeter.
Together Kroger and Roundy’s will operate 2,774 supermarkets and employ over 422,000 associates, according to the company.
“We are excited about becoming part of The Kroger Co.," said Robert A. Mariano, chief executive officer of Roundy’s, Inc. "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 said it doesn't plan to close any stores and Roundy's headquarters will stay in Milwaukee.
As part of the deal, Kroger said it will pay $3.60 for each share of Roundy's, a 61 percent premium over its closing price of $2.18 on Tuesday. Including debt, Kroger valued the deal at $800 million.
"We admire what Bob Mariano has done with the Mariano’s banner in Chicago," said Rodney McMullen, Kroger's chairman and chief executive officer. "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,"
The deal is expected to close before the end of the year, although Roundy's has an option to find another buyer within 30 days.
Shares of Roundy's jumped $1.40, or 64 percent, to $3.58 in morning trading Wednesday. Kroger shares slipped 31 cents to $36.96.