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Kroger to Sell Convenience Store Business for $2.15 Billion

UK-Based EG Group Buying 726-Store Business
February 7, 2018
The Kroger Co. (NYSE: KR) has arranged to sell its convenience store business unit to EG Group, a privately-held gas station/convenience store retailer based in the United Kingdom, for $2.15 billion.

As part of the agreement, EG Group will establish a North American headquarters in Cincinnati and continue to operate the stores under their established brand names.

Kroger operates 726 c-stores across 18 states. The stores, which include 66 franchise operations, operate under the following Turkey Hill, Loaf 'N Jug, Kwik Shop, Tom Thumb and Quik Stop banners. Kroger's convenience store business generated revenue of $4 billion, including the sale of 1.2 billion gallons of fuel, in 2016.

Kroger announced in October 2017 it was weighing options for its convenience store business, including a potential sale.

"As part of our regular review of assets, it has become clear that our strong convenience store business unit will better meet its full potential outside of our business," said Mike Schlotman, Kroger's CFO. "One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates."

Mohsin Issa, EG Group founder and co-CEO, described his firm's entry into the U.S. as a "fantastic opportunity."

Kroger plans to use net proceeds from the sale to repurchase shares and lower its debt. The company expects the transaction to close quickly as EG Group has no U.S. presence today.

Goldman Sachs & Co. is acting as exclusive financial advisor to Kroger and Weil, Gotshal & Manges is acting as legal advisor to Kroger.

Morgan Stanley, Bank of America Merrill Lynch and Barclays are acting as financial advisors to EG Group. Allen & Overy is acting as legal advisor to EG Group.

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