Kroger, the largest U.S. grocery chain, plans to acquire Albertsons in the first half of the fiscal year 2024 instead of the earlier projection due to the ongoing discussions with federal regulators.
Kroger, Albertsons, and C&S Wholesale Grocers actively discuss with the Federal Trade Commission (FTC) and state attorneys general, stating, "While this is longer than we originally thought, we knew that our merger agreement and divestiture plan accounted for such potential timing." in a joint statement.
413 Store Divestiture
In September, Kroger agreed to sell 413 stores and eight distribution centers to C&S for $1.9 billion to finalize the $24.6 billion deal where C&S, with regulatory approval, may be required to buy an additional 237 stores. With plans to invest $500 million to reduce prices and $1.3 billion to improve customer experience, the grocery chain will invest an extra $1 billion to increase wages and benefits for all associates once the deal is done. Kroger is the largest grocery chain in the country with almost 2,800 stores, and Albertsons ranks as the second-largest, owning brands like Safeway and Acme.
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Strong Oppositions Due to Antitrust Concerns
The planned merger has encountered strong opposition from U.S. lawmakers and political leaders due to antitrust concerns that could allegedly result in increased prices, reduced consumers' shopping choices, and job losses due to smaller marketplace competition.
On Monday, Washington's attorney general filed a lawsuit to prevent the proposed merger, calling it "harmful" for shoppers and workers. Kroger and Albertsons expressed disappointment in the attorney general's premature decision while the merger is still under regulatory review.
No Potential Harm to the Grocery Industry
Kroger and Albertsons released a joint statement that preventing the merger would benefit more enormous, non-unionized retailers such as Walmart, Costco, and Amazon, allowing them to maintain and further increase their substantial dominance in the grocery industry. Six lawmakers, including Elizabeth Warren, Bernie Sanders, and Alexandria Ocasio-Cortez, wrote a letter to the FTC in December, arguing that Kroger's plan to sell hundreds of stores to C&S does not adequately address potential harms to consumers, workers, and the grocery industry.
C&S Wholesale Grocers as The New Competitor
To secure regulatory approval for the merger, Kroger and Albertsons plan to sell 413 stores, eight distribution centers, two offices, and five private label brands to C&S Wholesale Grocers, providing access to a retail footprint in 17 states. However, whether the divestment is sufficient to gain government approval and memories of Albertsons' problematic sale of locations to Haggen during its merger with Safeway might raise additional concerns.
Goal of the Merger
The sell-off aims to prevent store closures, maintain employment for frontline associates, and honor existing collective bargaining agreements after the merger. Moreover, it allows C&S to enter new areas and become a new competitor against the merged Kroger-Albertsons business.
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