(Bloomberg) — Kroger Co. is tapping the U.S. investment-grade market on Tuesday to finance its acquisition of grocer Albertsons Co. in what could be one of the biggest corporate bond deals of the year.
The supermarket chain plans to sell the debt in up to seven parts, according to a person familiar with the matter. The volume could be around $10 billion, Bloomberg previously reported. The longest part of the deal, a 40-year security, could yield around 1.9 percentage points more than Treasury bonds, said the person, who asked not to be identified because the details are confidential.
Some of the tranches contain so-called special mandatory redemption clauses, according to which the bonds will be called in if the acquisition of Albertsons is not completed.
The size of the transaction will be determined later Tuesday, before the offering is priced, but it is expected to be at least $10 billion. If true, Kroger’s offering would be one of the largest this year in the U.S. high-grade primary market.
Representatives for Kroger and Wells Fargo & Co., one of the managers involved in the deal, declined to comment. A spokesman for Citigroup Inc. did not immediately respond to a request for comment.
Kroger has agreed to buy Albertsons in October 2022. The deal was originally valued at $24.6 billion. Whether the Cincinnati, Ohio-based supermarket chain can take over its smaller competitor remains questionable.
A trial is scheduled to begin on Aug. 26 over the Federal Trade Commission’s lawsuit seeking to block the deal, which was originally valued at $24.6 billion in 2022. A separate trial involving Colorado’s opposition to the proposed takeover is scheduled to begin Sept. 30. The supermarket operators have proposed selling nearly 600 stores and cutting grocery prices by $1 billion.
The grocer is one of four potential issuers planning to sell new investment-grade U.S. bonds on Tuesday, according to an informal survey of debt issuers who declined to name the firms.
– With support from Kevin Kingsbury, Olivia Raimonde and Michael B. Marois.
(Updated with details everywhere.)
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