Last Friday, The Wall Street Journal ran a report that a number of private equity firms were considering the possibility of pursuing a leveraged buyout at Kroger.
In quick order, David Dillon, chairman and chief executive officer at the company, responded with a letter to store associates and any others who were interested in the message.
"With the ready availability of significant capital in private equity funds and Kroger's attractiveness as a franchise, rumors and speculation are not surprising. Unfortunately, the kind of speculation contained in the article can be disruptive to our associates and to the conduct of our business. I want you to know neither management nor our Board of Directors has any interest in pursuing a leveraged buyout transaction."
Mr. Dillon continued: "Our focus is on the execution of our business strategy, which is to serve our customers, and in that way to continue to grow Kroger as an independent public company and create value for our shareholders. Putting our customers first has generated substantial returns for our shareholders, and we expect to continue to grow as we face the challenges of this intensely competitive industry."
The WSJ piece speculated that large private equity firms such as Kohlberg Kravis Roberts (KKR), Blackstone Group, and TPG (formerly Texas Pacific) might individually or in a consortium be interested in going after the grocer. The chain, it was reported, would provide the opportunity for the firms to put available cash in a single entity with the knowledge that Kroger's real estate assets provide the equity firms with a fallback should the company performance not meet expectations.
Discussion Questions: Do you expect we will see a further acceleration of private equity firms seeking to acquire retail chains? What is your reaction to The Wall Street Journal report that Kroger may be a target for a leveraged buyout?