Kroger says Home Chef merger, increased borrowings to lift leverage

By Devika Patel

Knoxville, Tenn., June 21 – Kroger Co. foresees its leverage ratio increasing during the year due to increased borrowings, a planned merger and tax payments.

“We expect our net total debt to adjusted EBITDA ratio to increase throughout the year due to increased borrowings to fund our investment in Ocado, our planned merger with Home Chef and tax payments related to the gain from the sale of our convenience store business unit,” executive vice president and chief financial officer J. Michael Schlotman said on the company’s first quarter ended May 26 earnings conference call on Thursday.

Kroger’s net total debt to adjusted EBITDA ratio was 2.43x on a 52-week basis as of May 26. The company’s net total debt to adjusted EBITDA ratio target range is 2.3x to 2.5x.

The company’s cash position was $315 million as of May 26, compared to $335 million as of May 20, 2017.

On May 23, Kroger announced that it planned to acquire Home Chef, a Chicago-based private meal kit company.

The initial transaction price is $200 million and future earnout payments of up to $500 million over five years are contingent on achieving certain milestones, including significant growth of in-store and online meal kit sales.

The transaction is expected to close in the second quarter.

Kroger is a Cincinnati-based grocery retailer.

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