Kroger To Split Stock After Fred Meyer Purchase

CINCINNATI - Kroger, the nation's largest grocery chain, will split its stock 2-for-1 when its $12.8 billion acquisition of Fred Meyer wins government approval, shareholders were told yesterday.

The new company will have about 2,200 stores in 31 states from coast to coast, with about 300,000 employees.

It will keep the name Kroger and remain based in Cincinnati. Fred Meyer will operate as a unit of Kroger, retain its name and maintain headquarters in Portland.

Kroger also will acquire Bellevue-based Quality Food Centers, owned by Fred Meyer.

"The combination of Fred Meyer and Kroger will generate extraordinary profit potential in merchandising, store operations and distribution," said Joseph Pichler, Kroger's chairman and chief executive officer.

"Following our merger, 10 cents of every dollar spent in an American food store will be spent in one of our stores."

He added that as the nation's largest food retailer, the company will generate substantial economies of scale, increased purchasing power and significant cost savings.

Kroger was No. 36 on this year's Fortune 500 list, with $28.2 billion in sales. Fred Meyer was No. 104, at $14.9 billion. The combined $43.1 billion would put Kroger at No. 15.

Analyst George Thompson, who follows Kroger for Prudential Securities in New York, said there was no reason to suspect that regulators have qualms about the merger, which has been approved by shareholders of both companies.

"It's a very good fit," Thompson said.

"It almost seems to me that the federal government has very little to complain about. Geographically, Meyer is where Kroger isn't."

Most of Kroger's stores are in the Midwest and South; most of Fred Meyer's are in the West. They overlap only in Texas and Arizona.

The merger still needs approval by the Federal Trade Commission (FTC). Thompson said the slowness in obtaining FTC approval was not cause for concern.

The government is backed up in approvals for deals in general, not just the Kroger-Fred Meyer merger, he said.

Announcement of the stock split, which is scheduled to occur on the first business day that falls 10 days after completion of the merger, was not a surprise.

"The combined Kroger and Fred Meyer Co. will generate substantial economies from volume-based purchasing in food, health and beauty aids, general merchandise, seasonal items, supplies, equipment and raw materials for our plants," said Bob Miller, vice chairman and CEO of Fred Meyer.

He will be Kroger's chief operating officer and vice chairman after the merger.

"Both Kroger and Fred Meyer have powerful private-label programs," Miller said. "By combining the best of each, we will become the industry leader in this rapidly growing and highly profitable segment of our business."