– Roundy’s Inc., the Milwaukee-based grocery retailer that owned Rainbow Foods in the Twin Cities until last year, will be purchased by Kroger Co. in an $800 million deal announced Wednesday.

The deal will pay Roundy’s stockholders $3.60 a share, a 65 percent premium over Tuesday’s closing price. The $800 million figure includes $646 million in debt that will be assumed by Cincinnati-based Kroger.

Kroger executives say they intend to invest in Roundy’s existing stores in Milwaukee, Wisconsin and Illinois and intend to grow their sales in a competitive grocery market. Roundy’s Pick ’n Save has long been the dominant grocery chain in Milwaukee, but it has come under withering competition from local, national and regional players.

“The thing that we will be able to do over time is obviously we have more financial resources than Roundy’s had, so we’ll be able to invest in the market more aggressively, and over time the customer will see that,” Rodney McMullen, Kroger’s chief executive, said in an interview.

Roundy’s headquarters will remain in Milwaukee, and the business will continue to be run by “key members” of the senior management team, the companies said. There are no plans to close stores.

Kroger, which operates 2,623 supermarkets in 34 states, said it expects to benefit from Roundy’s expertise in running urban supermarkets that McMullen said are “resonating with customers” in Chicago, where Roundy’s operates 34 upscale Mariano’s stores.

McMullen said Kroger also intends to revitalize the Pick ’n Save brand.

Kroger’s acquisition of Roundy’s is great news for the region, given Roundy’s financial condition, said Bert Flickinger, managing director of Strategic Resource Group, a New York retail consultancy.

In its most recent quarter, which ended July 4, Roundy’s lost $1.4 million while same-store sales — a key measure of retail performance — fell 3.9 percent from a year earlier.

“This is the best early Christmas present that the vendors who depend on the company and the team members who work in the company could have,” Flickinger said. “Kroger is the best-led retailer of any kind in the U.S.

“It can compete effectively in the range from Wal-Mart to Whole Foods to Costco.”

In the Twin Cities, Roundy’s bought Rainbow Foods in 2003 after Rainbow parent Fleming Cos. filed for bankruptcy. Last year, Roundy’s sold 18 of its remaining 27 Rainbow stores to a group led by Supervalu Inc., the parent of Cub Foods. The other nine stores were closed.


The Chicago Tribune and Associated Press contributed to this report.