U.K.-based retailer EG Group to enter U.S. market with deal

CINCINNATI — Kroger Co. has agreed to sell its convenience store business unit to EG Group, a privately-held convenience store retailer based in the United Kingdom, for $2.15 billion. The companies expect to close the transaction during the first quarter of Kroger’s fiscal year.

As part of the agreement, EG Group will establish its North American headquarters in Cincinnati, Ohio. The acquired stores will continue to operate under their established banner names.

Kroger announced in October 2017 that it planned to explore strategic alternatives for its convenience store business, including a potential sale.

“One of the most important considerations in our decision-making process was continued operations to ensure minimal disruption to our associates,” said Mike Schlotman, Kroger’s executive vice president and chief financial officer. “We are very pleased the EG Group plans to establish their North American headquarters in Cincinnati. 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. 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.”

EG Group Founder and co-CEO Mohsin Issa said the deal represents an opportunity to expand into the U.S. market.

“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.,” Issa 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.”

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

Kroger’s convenience store business operates in 18 states. It includes 66 franchise operations. The stores employ 11,000 associates and operate under the following 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.

Kroger’s supermarket fuel centers and its Turkey Hill Dairy are not included in the sale.