Kroger, Albertsons to sell more stores to satisfy FTC concerns over $24.6B acquisition deal - Cincinnati Business Courier (2024)

Kroger Co. and Albertsons Cos. Inc. have revamped their store divestiture plan to include the sale of more stores in an effort to get regulatory approval for their planned $24.6 billion acquisition.

Downtown Cincinnati-based Kroger (NYSE: KR), the nation’s largest operator of traditional supermarkets, and Boise, Idaho-based Albertsons, the acquisition target and the country’s second-largest operator of traditional supermarkets, have increased the number of stores they plan to sell to 579. That’s 166 more than the 413 stores in an effort to satisfy the Federal Trade Commission’s antitrust concerns. But that plan allowed for the number of stores to be sold to be increased to as high as 650.

The FTC sued Feb. 26 in federal court to block the transaction due to antitrust concerns. A hearing is set for Aug. 26 in Oregon.

The FTC says the deal will hurt competition and negatively affect consumers, workers and suppliers. Kroger and Albertsons argue the acquisition is necessary for them to remain successfully competitive against an expanding grocery market that includes Amazon, warehouse stores and others in addition to Walmart and traditional supermarkets. They say it will result in better prices, more product selection and additional opportunities for workers.

An FTC spokesperson said it had no comment on the expanded divestitures.

The new plan calls for Kroger and Albertsons to sell the Haggen banner to C&S in addition to the previous agreement to sell the QFC, Mariano's and Carrs banner names. Haggen has 15 stores along the west coast of Washington state. Kroger will retain some of those stores but under one of its or Albertsons’ banner names.

C&S will also license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado under the amended agreement. Kroger will rename its remaining stores in those states. Kroger will keep the Albertsons and Safeway banners in the remaining states.

No Greater Cincinnati stores or any in Ohio, Kentucky or Indiana are to be sold. Kroger and Albertsons have no overlap in those areas.

Stores to be sold in the amended plan are:

The purchase price increased to $2.9 billion from the previous $1.9 billion with the additional stores to be sold. The agreement calls for the stores to be sold to C&S when the merger is completed.

Kroger has more than 2,700 stores in 35 states. Albertsons has 2,272. The combined companies have stores in 48 states. Their stores overlap in several big markets, mainly in the West, including Denver, Los Angeles, Phoenix and Seattle.

The new plan “maintains Kroger's commitments to customers, associates and communities, addresses concerns raised by regulators and will further ensure that C&S can successfully operate the divested stores as they are operated today," Kroger CEO Rodney McMullen said in a news release.

"Importantly, the updated divestiture plan continues to ensure no stores will close as a result of the merger and that all frontline associates will remain employed, all existing collective bargaining agreements will continue and associates will continue to receive industry-leading health care and pension benefits alongside bargained-for wages. Our proposed merger with Albertsons will bring lower prices and more choices to more customers and secure the long-term future of unionized grocery jobs."

C&S CEO Eric Winn said the new plan will give C&S the assets and operators it needs to be able to successfully compete in those markets.

"C&S is a leader in the grocery industry,” Winn said in the release. “We look forward to welcoming storied banners, quality private label brands and a team of experienced retail associates into the C&S family. This amended agreement enables C&S's heritage of selection, value and customer service to continue our legacy of braggingly happy customers."

An analyst who follows Kroger said the revised agreement should satisfy the FTC’s concerns regarding store divestitures.

“The new plan addresses the FTC’s concerns that C&S is a weakened competitor,” James Lewis, senior equity analyst at downtown-based Bartlett Wealth Management, told me. “The FTC’s issue was that C&S lacks financial stability and stores purchased from Kroger/Albertsons would eventually close, harming consumers by limiting competition. The new agreement positions C&S better from a longevity perspective.”