Kroger Merger with Ahold Delhaize

Craft an initial post where you provide a high-level synopsis of your project. Include details about which bidder and target you chose, how the target met the bidder’s objectives, what valuation you came up with, how you structured the deal, and any risk that you identified.

Also, provide an implementation plan where you assume the merger moves forward. Explain the next steps, including which details to consider, especially cultural issues.

In response to your peers, compare and contrast your plan with theirs. Can you find any gaps in their plans? If so, provide suggestions to address the gaps.

My project it the merger between Kroger and Sprouts Farmer Market. Kroger’s objective is diversification. Kroger is one of the larger retailer in U.S. It operated supermarkets with fuel center, and pharmacies, convenience store, jewelry stores and an online retailer. While Sprouts Farmer Market is a small retailer company which provides a fresh, natural and organic product. If Kroger acquire Sprouts, Kroger can extend the natural and organic products. Due to the Kroger do not have its own store for the organic products, Sprouts would be the great channel to extend the organic product line. Kroger has its organic private label brand called the Simple Truth. Most organic product are sold in New York via the online company (Vistacost.com). Therefore, Sprouts would be better choice to acquire.

Sprouts ‘valuation for acquire would be $2-3 billion dollar. While Kroger has free cash flow only $311 million on Jul 2017, it should generate cash from equity or debt. However, Kroger financial have high debt due to the acquisition and repurchasing program. Therefore, it cannot acquire target by cash. Other option would be cash and stocks in combination for the acquisition.  

The next steps that company should consider if the merger moves forward is how to integrate two companies. After acquiring both company would share culture and individual personalities. The target company will work with the new management structure like how decisions are made, policies and procedures, the types of people hired, and event its marketing efforts. Both senior Human Resources or Organizational Development of companies have to participate in the integration process to dive the importance of culture. For example, decision-making style, leadership style and role definitions. (Seven Steps for Addressing Postmerger Cultural Issues)