, Columnist
The Big Idea Behind Kroger's Small-Fry Deal
Buying money-losing Roundy's seems like an odd choice for a takeover, but it's all about location in the grocery industry.
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Two words explain why grocery giant Kroger decided to go after a small-fry, money-losing supermarket chain: Chicago and Wal-Mart.
Kroger on Wednesday said it was buying Milwaukee-based Roundy's for $800 million including debt, a transaction that will bring the chain's Pick `n Save, Mariano's and Metro Market stores under its umbrella. The $3.60-per-share price tag is roughly 60 percent more than Roundy's average price in the days before the announcement -- a steep premium to pay for a company that at first blush doesn't exactly look like a trophy asset.