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Proposed acquisition of Albertsons by Kroger

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Proposed acquisition of Albertsons by Kroger
InitiatorKroger
TargetAlbertsons
TypeFull acquisition
Cost$24.6 billion
InitiatedOctober 14, 2022

The Kroger–Albertsons acquisition is a planned acquisition between the two American grocery chains which serve most of the country's mid-tier grocery market, Kroger and Albertsons. Kroger plans to compete with non-union grocery chain Amazon Fresh, which includes Whole Foods Market, discount department store chains Target and Walmart, and the warehouse club retail chains Costco and Sam's Club.

Announced in October 2022, Kroger, one of the largest supermarket chains in the United States, agreed to purchase Albertsons for $24.6 billion.[1] This merger, if approved, would create one of the largest grocery store chains in the US, combining nearly 5,000 stores and employing approximately 700,000 people.[2]

Background

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Previous mergers and acquisitions

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Albertsons merged with Safeway in 2015 in a $9.2 billion deal which included an FTC requirement to spin off 168 stores to stop the new company having a monopoly in certain markets.[3] The commitment was the largest ever divestiture of supermarkets at the time.[4] 146 stores were sold to Haggen, a Washington supermarket chain, for around $300 milion.[3] The deal was closed in January 2015;[5] Haggen ended up announcing in August that it would close or sell around a fifth of its stores,[6] and in September sued Albertsons for allegedly sabotaging its expansion, before filing for bankruptcy.[5] Albertsons bought 33 former Haggen stores for $14.3 million at a bankruptcy auction in November, many for the nominal price of $1 since they came with liabilities as part of their sale.[3] The failure of the spin-off of stores to Haggen has been seen as a particular concern for the proposed Albertsons–Kroger merger.[4]

Size and market cap of each company

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Lead-up to the 2022–2024 merger

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In October 2022, Kroger agreed to buy Albertsons for $34.10 per share, valuing the deal at $24.6 billion.[1] The acquisition aims to enhance Kroger’s competitive edge by expanding its market presence and leveraging economies of scale to offer better prices and services to customers. However, the merger has faced significant scrutiny from regulators and opposition from various stakeholders.[7]

Challenges

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Union challenges

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In May 2023, the UFCW International announced their opposition to the deal.[8] The International Brotherhood of Teamsters also oppose the deal,[9] saying it "threatens jobs, wages, and benefits for thousands of workers".[10]

Regulatory challenges

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The Federal Trade Commission (FTC) and several state attorneys general have raised concerns about the potential anticompetitive effects of the merger. The FTC filed a lawsuit in February 2024 to block the acquisition, arguing that it would reduce competition, lead to higher grocery prices, and negatively impact workers’ wages and benefits. Additionally, the state attorney general for Washington filed a separate lawsuit, citing internal communications from Albertsons’ executives that questioned the legality and consumer benefits of the deal.[11]

On November 29, 2022, the chief executives of the two companies went before the antitrust panel of the Senate Judiciary Committee to defend the merger.[12]

As of mid-2024, the acquisition is still under review by federal and state regulators. Ongoing negotiations and legal challenges have delayed the completion of the deal, with a final decision expected by mid-August 2024. In January 2024, Bob Ferguson, the Washington Attorney General filed a lawsuit to stop the merger. [13] In February 2024, Colorado Attorney General Phil Weiser filed a lawsuit in an attempt to stop the merger due to his belief that it would greatly reduce competition and harm Coloradans.[14]

Divestiture plans

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To address regulatory concerns, Kroger and Albertsons have proposed divesting 579 stores across various locations to C&S Wholesale Grocers. This divestiture is intended to maintain competitive balance in the grocery market and alleviate fears of a monopoly.[15]

Potential combined list of Banners

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Kroger Banners

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Albertsons Banners

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To be divested to C&S

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References

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  1. ^ a b Repko, Melissa (October 14, 2022). "Kroger agrees to buy rival grocery company Albertsons for $24.6 billion". CNBC. Retrieved July 15, 2024.
  2. ^ Coolidge, Alexander. "Kroger wants to merge with rival Albertsons: What we know about the proposed $25B takeover". USA TODAY. Retrieved July 15, 2024.
  3. ^ a b c Robert Anglen (November 25, 2015). "Albertsons buys back stores feds forced it to sell". The Arizona Republic. Retrieved August 26, 2024.
  4. ^ a b Leah Nylen; Christopher Cannon (July 17, 2024). "Kroger-Albertsons Deal Is Haunted by 'Spectacular' Past Failure". Bloomberg News. Retrieved August 26, 2024.
  5. ^ a b Ángel González (September 9, 2015). "Struggling Haggen files for bankruptcy protection, parts with Southwest co-CEO". The Seattle Times. Retrieved August 26, 2024.
  6. ^ Ángel González (August 14, 2015). "Haggen retreats from big expansion, shedding 27 stores". The Seattle Times. Retrieved August 26, 2024.
  7. ^ Kang, Jaewon. "Kroger to Buy Albertsons in $24.6 Billion Deal That Would Create New Grocery Giant". WSJ.
  8. ^ Kang, Jaewon. "Biggest Grocery Union Opposes $20 Billion Kroger-Albertsons Deal". WSJ.
  9. ^ Josh Sisco; Marcia Brown (August 26, 2024). "Feds take grocery merger to court amid 2024 fight over high food prices". Politico. Retrieved August 26, 2024.
  10. ^ "Teamsters Statement Regarding Proposed Kroger-Albertsons Merger and Asset Sale to C&S Wholesale". International Brotherhood of Teamsters. July 10, 2024. Retrieved August 26, 2024.
  11. ^ Meyersohn, Nathaniel (February 26, 2024). "FTC sues to block Kroger and Albertsons' $25 billion mega-merger | CNN Business". CNN. Retrieved July 15, 2024.
  12. ^ "Albertsons, Kroger CEOs defend $25 bln merger to U.S. Senate committee | Reuters". Reuters.
  13. ^ Selyukh, Alina (January 15, 2024). "Warning of higher grocery prices, Washington AG sues to stop Kroger-Albertsons merger". NPR.
  14. ^ "Colorado attorney general sues to block Kroger-Albertsons merger". February 14, 2024.
  15. ^ "Kroger, Albertsons Unveil Stores to Be Divested in Merger". Bloomberg.com. July 9, 2024. Retrieved July 15, 2024.
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