Business Combination

6 Months Ended

Jun. 29, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisition of United Grocery Outlet

On February 14, 2024, Grocery Outlet Inc., our wholly owned subsidiary, entered into a Stock Purchase Agreement with BBGO Acquisition, Inc., a Delaware corporation ("Holdings"), specified parties therein that beneficially owned Holdings, and Southvest Fund VII, L.P., a Delaware limited partnership, to acquire all of the issued and outstanding capital stock of Holdings (the "Transaction"). On April 1, 2024, the Transaction was completed for the total purchase consideration of $62.8 million, including $2.0 million of cash and cash equivalents on hand, subject to post-closing adjustments, and was funded with cash on hand.

Holdings is the owner of all of the issued and outstanding capital stock of The Bargain Barn, Inc., a Tennessee corporation doing business as United Grocery Outlet ("United Grocery Outlet"). United Grocery Outlet operated 40

discount grocery stores across six states in the southeastern United States as of April 1, 2024. The acquisition provides us with the opportunity to scale in a new region as well as a platform for future potential expansion in the Southeast.

We accounted for the acquisition as a business combination using the acquisition method of accounting, which requires, among other things, that we allocate the purchase consideration to the identifiable assets acquired and liabilities assumed based on their acquisition-date fair values. The fair values of the acquired assets and assumed liabilities recorded on our condensed consolidated financial statements may be subject to adjustment pending completion of final valuation. These fair value estimates will be reevaluated and adjusted, if needed, during the measurement period of up to one year from the acquisition date, and recorded as adjustments to goodwill.

The following table summarizes the preliminary purchase price allocation recorded for acquired assets and assumed liabilities at the acquisition date (amounts in thousands):


Assets
Cash and cash equivalents	$	2,003
Other accounts receivable	148
Merchandise inventories	14,208
Prepaid expenses and other current assets	2,828
Property and equipment, net	6,950
Operating lease right-of-use assets	35,266
Goodwill	28,889
Other assets	422
Total assets acquired	90,714

Liabilities
Trade accounts payable	3,090
Accrued and other current liabilities	434
Accrued compensation	2,693
Current lease liabilities	2,581
Income and other taxes payable	742
Deferred income tax liabilities, net	476
Long-term lease liabilities	17,921
Total liabilities assumed	27,937
Total net assets acquired	$	62,777

The goodwill recognized reflects the expected future benefits from certain synergies and intangible assets that do not qualify for separate recognition. The goodwill will not be deductible for income tax purposes.

During the 26 weeks ended June 29, 2024, we recognized $7.6 million in acquisition and integration costs related to due diligence, legal, other consulting and retention bonus expenses. Such costs were included within selling, general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.

Pro forma results are not presented as the impact of this acquisition is not material to our condensed consolidated financial results.