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Kroger Details Restructuring Plan With PM-Kroger-Glance

September 27, 1988

CINCINNATI (AP) _ Kroger Co. expects to raise $333 million after taxes from the sale of stores and food processing plants under a massive restructuring aimed at thwarting two takeover bids.

The $4.6 billion restructuring will leave Kroger shareholders with continuing interest in the company and will be more lucrative than the unsolicited purchase offers by Dart Group Corp. the investment firm Kohlberg Kravis Roberts & Co., Kroger officials said Monday in outlining the plan.

Kroger Chairman Lyle Everingham and president Joseph Pichler said the restructuring also would turn Kroger, the nation’s largest supermarket operator, into a smaller, albeit highly leveraged company.

Kroger’s board of directors rejected as inadequate both the $4.6 billion cash and securities offer by New York-based Kohlberg Kravis and the rival $4.32 billion bid by Dart, of Landover, Md.

The board also was advised there could be antitrust problems with the offer from Kohlberg Kravis, which recently outbid Dart for the Safeway and Stop & Shop grocery chains.

Kroger stock rose 62 1/2 cents to close at $56.37 1/2 a share in New York Stock Exchange trading Monday.

The restructuring, which will be Kroger’s second since 1986, is worth $57 to $61 per share, officials said.

Kroger’s plan, which was publicly proposed Sept. 13, would pay company shareholders $40 a share in cash, plus securities valued at $8 and publicly traded stock worth between $5 and $10.

The company will net about $333 million from the sale of assets, and will lay off workers at its Cincinnati headquarters.

Everingham declined to tell reporters which food processing plants will be sold or how many headquarters employees would be laid off. Those layoffs will be in addition to a cost-cutting program already under way to reduce headquarters employment through attrition, Everingham said.

Kroger said it had commitments for $3.6 billion in bank financing for the restructuring, from a group led by New York’s Citibank and Chemical Bank and First National Bank of Chicago.

Spokesmen for Dart and Kohlberg Kravis declined comment Monday.

Kroger said it would sell some of its food processing facilities nationwide; its 27-supermarket Fry’s of California division in northern California; its six-unit Welcome Inc. superwarehouse venture in Greenville, S.C., Jacksonville, Fla., Mobile, Ala., and Richmond, Va.; and its 29 supermarkets in Charlotte, N.C., and Charleston, S.C.

Kroger also said it would sell its 16-unit Price Savers Wholesale Warehouse Inc. to a management-led investment group, would continue the sale of its Florida Choice division, and would and then lease back Kroger-owned stores and real estate in Texas. It will continue its Texas retail operations in that state and will sell its general merchandise distribution center in San Marcos, Texas.

The 105-year-old company announced Friday that it intended to go ahead with the restructuring despite competing offers by Dart and Kohlberg Kravis. The Haft family, which controls Dart, triggered the competition when federal regulators announced this month that they had given the Hafts clearance to buy at least $15 million worth of Kroger stock.

Dart, a retailing company which has been involved in a number of unsuccessful but profitable takeover bids in recent years, offered a week ago to buy Kroger for $55 a share in cash and securities for each of Kroger’s 78.6 million outstanding shares.

Kohlberg Kravis entered the bidding Tuesday with an offer to buy Kroger for $58.50 in cash and securities in a leveraged buyout.

Kroger operates more than 1,300 supermarkets, 935 convenience stores and 15 membership warehouses in 29 states. The company also processes food products for sale in its stores and to outside customers.

Kohlberg Kravis won a hostile takeover battle for Beatrice Cos. in which the Haft family was a bidder in 1985, and outbid the Hafts for Safeway in 1986 and Stop & Shop earlier this year.

Dart owns the Crown Books and Trak Auto Stores chains.

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