Kroger Sells C-Store Business for $2.15B

After months of speculation, The Kroger Co. inked a deal to sell its convenience store business unit to the EG Group, a privately held convenience store retailer based in Blackburn, Lancashire, United Kingdom, for $2.15 billion. The deal is expected to close during the first quarter of Kroger's fiscal year. 

Kroger's supermarket fuel centers and its Lancaster, Pa.-based Turkey Hill Dairy division are not included in the sale.

The sale comes after months of speculation as to who would purchase Kroger's c-store business following an October 2017 call with investors, in which company officials discussed an asset review suggesting that the c-store business might be more valuable to spin off  in conjunction with the retailer's Restock overhaul. 

As part of the agreement, EG Group will establish its North American headquarters in Kroger's hometown of Cincinnati, and will continue operating the c-stores stores under the established banner names. 

Kroger said it plans to use net proceeds from the c-store sale to repurchase shares and lower its net total debt to adjusted EBITDA ratio. 

Mike Schlotman, Kroger EVP and CFO, revealed that one of the most important considerations in Kroger's decision-making process was ensuring minimal disruption to associates.  

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"EG Group is also a recognized international petrol forecourt convenience operator, and they have a commercial model which clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust," Schlotman said in a statement. "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."

Mohsin Issa, EG Group founder and co-CEO, called the company's entry into the U.S. market "a fantastic opportunity to deliver a successful retail offer to consumers across the various states.

"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.," he said. "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."

Issa shared that the EG Group's business model is based on creating a stronger relationship  between consumers and leading retail brands, aiming to deliver convenience and serve as  a retail destination for motorists who live and work nearby.

Related:Kroger Considers C-Store Sale Amid 'Restock' Plan

Kroger's convenience store business operates nearly 800 stores in 18 states and includes 66 franchise operations. The stores employ 11,000 associates and operate under the banner names Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop.

Kroger's convenience store business generated revenue of $4 billion, including selling 1.2 billion gallons of fuel, in 2016.