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Supermarket Giants Kroger and Albertsons Announce Plan to Merge in $25 Billion Deal Supermarket Giants Kroger and Albertsons Announce Plan to Merge in $25 Billion Deal
(about 2 hours later)
The grocery titan Kroger announced plans on Friday to acquire Albertsons in a deal that could reshape the grocery landscape in the United States. The grocery giant Kroger announced plans on Friday to acquire Albertsons in a deal that could reshape the supermarket landscape in the United States.
The deal would unite the country’s two largest supermarket chains, which have been forced by rising inflation and competition from Walmart and Amazon to choose between cutting further into their profit or the customer’s wallet. The deal would unite the country’s two largest supermarket chains, which have been forced by rising costs and competition from Walmart and Amazon to choose between cutting into their profit or the customer’s wallet.
Kroger said it will pay $34.10 per share to acquire Albertsons, valuing the company at about $24.6 billion including debt. That is about 20 percent higher than the close of Albertsons stock on Thursday, which was already elevated on reports that a deal with Kroger was in the works. Kroger said it will pay $34.10 per share to acquire Albertsons, valuing the company at about $24.6 billion including debt. The per-share price is about 20 percent more than Albertsons stock ended trading at on Thursday, a level already elevated by reports that a deal with Kroger was in the works.
Albertsons and Kroger, with 222 years of grocery experience between them, have been squeezed by the expansion of high-powered retailers into the industry. Their combined annual revenue of $209 billion would put them on a par with Walmart’s grocery sales, which totaled $218 billion last year. Albertsons and Kroger, which own chains including Ralphs, Safeway and Vons, have been squeezed by the expansion of high-powered retailers into the industry. Once combined, their annual revenue of $209 billion would come close to Walmart’s grocery sales, which totaled $218 billion last year.
“Through a family of well-known and trusted supermarket banners, this combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households,” Kroger and Albertsons said in a joint statement. “Through a family of well-known and trusted supermarket banners, this combination will expand customer reach and improve proximity to deliver fresh and affordable food to approximately 85 million households,” the companies said in a joint statement.
But the proposed merger is likely to invite antitrust scrutiny from regulators, who have been focusing on the potential power of large companies to affect consumer prices. Kroger and Albertsons are expected to propose selling off certain stores, but Lina Khan, who leads the Federal Trade Commission, which is likely to review any deal, has expressed skepticism that such solutions are sufficient to address antitrust concerns. But the proposed merger is likely to invite antitrust scrutiny from regulators, who have been focusing on the potential power of large companies to affect consumer prices. The retailers said Friday that they are planning to sell certain stores in order to pass regulatory scrutiny. But Lina Khan, who leads the Federal Trade Commission, which is likely to review the deal, has in the past expressed skepticism that such moves are sufficient to allay antitrust concerns.
Kroger, based in Cincinnati, operates 2,750 grocery stores across the United States under banners that include Ralphs, Dillons and Harris Teeter and has a market capitalization of about $32 billion. Albertsons, based in Boise, Idaho, runs 2,200 supermarkets under names like Albertsons, Safeway and Vons and has a market capitalization of roughly $15 billion. Even before the deal was announced on Friday, consumer protection groups had begun to raise concerns about the possibility following reports of a possible merger. The American Economic Liberties Project, a nonprofit that promotes antitrust legislation, criticized it as a “bad deal for consumers, workers and communities.”
Consumer protection groups immediately spoke out against a Kroger-Albertson merger when news reports surfaced on Thursday about the possibility. The American Economic Liberties Project, a nonprofit that promotes antitrust legislation, criticized it as a “bad deal for consumers, workers and communities.”
“There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring,” Sarah Miller, the group’s executive, said in a statement on Thursday.“There is no reason to allow two of the biggest supermarket chains in the country to merge — especially with food prices already soaring,” Sarah Miller, the group’s executive, said in a statement on Thursday.
Kroger, based in Cincinnati, operates 2,750 grocery stores across the United States under banners that include Ralphs, Dillons and Harris Teeter and has a market capitalization of about $32 billion. Albertsons, based in Boise, Idaho, runs 2,200 supermarkets under names like Albertsons, Safeway and Vons and has a market capitalization of roughly $15 billion.
The retailers said on Friday that, depending how the sale process for their stores goes, they may also spin off from 100 to 375 stores into a separate stand-alone company. Analysts have pointed to overlap between the two, particularly on the West Coast.
The grocers, whose workforces are unionized, may also point to their enhanced unionized heft as part of their discussions with the administration, which has been a significant proponent of unions. Neither of the companies’ largest rivals in the grocery industry, Amazon and Walmart, is unionized.
Both retailers are coming off pandemic highs, as homebound customers stocked up on food. But they are now facing significant pressure as inflation cuts into their profit margins and customers return to eating outside their homes. That’s all while larger rivals like Amazon and Walmart have invested in the digital and delivery parts of their business.
“It’s a question of, what do you do to sustain that momentum over the next several years?” said Michael Montani, an analyst at Evercore ISI. “This is a strategic action to try to keep the customers they won during Covid and enhance their experience, so they’re more competitive.”
Kroger’s chairman and chief executive, Rodney McMullen, would remain in that role of the combined company, as would Kroger’s chief financial officer, Gary Millerchip. The companies expect to close the deal in early 2024.