Supermarket giant Kroger Co. is buying Roundy's Inc. for $800 M which includes debt to expand its operation in Wisconsin and Chicago areas.
Roundy's Inc. is a chain of supermarkets based in Milwaukee under Pick 'n Save, Copps and Metro Market and Mariano's mostly in the upper Midwest.
The merging will give Kroger Co. additional 151 retail grocery stores and 101 pharmacies with a total of 2,774 outlets in 35 states.
"Kroger sees this as a merger. They want to take the best of what we do and add the best of what they do. Our view is that we're not going to fiddle with things that are critical to our success," says Bob Mariano, CEO of Roundy's Inc.
With increased competition from various supermarket chains such as Supervalu Inc. and Albertsons, as well as the Wal-Mart Stores Inc. and Target Corp., Kroger Co. hopes to expand and reach wider markets.
The supermarket chain also bought Harris Teeter in 2013 to expand operations in the mid-Atlantic region and also obtained health products retailer Vitacost.com to cope with the increase in health and wellness demand.
According to Scott Moses, head of Food, Drug & Specialty Retail M&A at Sagent Advisors, the merging would help Mariano's not only to recover from financial debt but also in improving customer experience and competing with other supermarket giants.
Both Mariano and Kroger believe that the merging is beneficial for both parties.
Mariano's had been known for gimmicks such as in-store pianists and a variety of fresh and organic products for health-conscious customers.
According to analysts, Roundy's has not turned a profit since 2013 and Mariano's get 65% of its profit from its bigger chain Pick 'n Save stores in Wisconsin.
Mike Schlotman, Kroger's Chief Financial Officer said that Mariano together with his management team will still run the operations of Roundy's adding that the $40 million savings they hope to achieve will not put the store or any of Mariano's employees at the expense.
According to Schlotman, Mariano is "very energized and excited by this project." He also added that the deal will materialize Kroger's long-time plan in gaining bigger exposure and market in the Chicago area.
