The Kroger Co. (ASX: KR) has agreed to acquire the food and drug retailer Giant Eagle in a deal valued at $1.65 billion in cash plus the assumption of debt.

The Deal's Structure and Timing

The retail giant announced that its board has approved the transaction, which is expected to be completed at some point next year. The acquisition will be funded with cash, and Kroger will also take on the target company's existing debt.

Financial and Strategic Rationale

Kroger stated that, before accounting for transaction and integration expenses, the deal is anticipated to be accretive to adjusted earnings per share by the second full fiscal year following its closure. The company's CEO, Greg Foran, highlighted that Giant Eagle is a strong regional operator with an excellent reputation for fresh produce, pharmacy services, private brands, and customer loyalty. He noted the deal underwent careful evaluation and represents a strong strategic fit, aligning with Kroger's capital allocation and merger strategy.

Regulatory Considerations and Company Profiles

To facilitate regulatory approval, Kroger and Giant Eagle plan to divest a small number of Giant Eagle stores. Kroger operates over 1,200 stores across 16 U.S. states and is the nation's second-largest food retailer by revenue, trailing only Walmart. Founded in 1931, privately held Giant Eagle operates nearly 200 supermarkets across western Pennsylvania, north-central Ohio, northern West Virginia, Maryland, and Indiana, along with 11 standalone pharmacies, generating approximately $9 billion in annual sales.

In pre-market trading on Wednesday, shares of Kroger declined nearly 3%.