Kroger closes YouTech sale for $565 million

The Kroger Co. has completed the sale of its You Technology digital coupon subsidiary to e-commerce analytics firm Inmar in a $565 million deal.

Kroger said yesterday that the transaction includes $400 million in cash received upon closing, which it aims to use to pay down debt. When announcing their agreement in December, Kroger and Inmar didn’t disclose financial terms.

Also as part of the YouTech sale, Kroger finalized a long-term pact with Winston-Salem, N.C.-based Inmar to provide digital offer management services to its supermarkets.

"The monetization of our investment in YouTech and long-term agreement with Inmar demonstrate how Kroger can create value in different ways," Stuart Aitken, senior vice president of alternative business at Kroger, said in a statement. "We are excited about the additional value that can be brought forward through future partnerships to create customer value."

Kroger executives last fall said the company is looking to alternative businesses — including partnerships, media, consumer packaged goods (CPG) insights and Kroger Personal Finance — to help reach its goal of $400 million in operating profit by 2020 under the Restock Kroger initiative.

That objective also could entail asset sales, according to Jefferies analyst Christopher Mandeville. His team recently attended a breakfast hosted by retiring Kroger Chief Financial Officer Mike Schlotman, incoming CFO and Kroger Personal Finance CEO Gary Millerchip and Aitken.

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“Management is seeking to leverage the strong existing assets of its alternative businesses (media, Kroger Personal Finance, 84.51⁰ insights) and marry various data sets to drive better sales execution and provide an integrated set of solutions that allow for a more dynamic view of the shopper,” Mandeville said in a research note Wednesday. “While management does not intend on monetizing these core alternative assets, opportunity may arise in which Kroger could realize incremental EBIT gains from the sale of certain non-core alternative assets that it cultivates. For example, this morning, Kroger announced the sale of its digital coupon/rebate publishing platform YouTech to Inmar for $565 million, including $400 million in pretax cash.”

Kroger had acquired YouTech in February 2014. The South San Francisco-based company provides a cloud-based platform for the redemption of digital offers at Kroger and other U.S. retailers. Kroger said the combination of YouTech's online engagement capabilities with Inmar's expertise in managing open platforms will help retailers and CPG companies better compete by improving digital coupon and rebate access and distribution.

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"We look forward to our new strategic relationship with Inmar, which will bring Kroger's unique assets and personalization expertise together with Inmar's technology solutions to drive more innovation and value for Kroger customers and CPG partners," said Yael Cosset, chief digital officer at Cincinnati-based Kroger.

YouTech CEO Cheryl Black (left) is slated to join Inmar's executive management team as vice president and general manager of retail solutions.

"With this acquisition, we will be able to accelerate our innovation to deliver a more cost-effective, enhanced product set including better tools, reporting and analytics, as well as broader distribution," said David Mounts, chairman and CEO of Inmar. "We are excited to have Cheryl join our team and look forward to having her customer focus, retail expertise and entrepreneurial spirit leading product strategy for retail."