On Monday, Kroger and Albertsons said they are expanding their planned sale of grocery stores, selling 166 more locations than previously agreed upon to C&S Wholesale Grocers as they work to get regulatory approval for their proposed $25 billion merger. Kroger and Albertsons are selling their asset as they want to appease federal antitrust regulators trying to block their merger.
Kroger Albertsons sell off
The companies Kroger and Albertsons store have been looking to sell stores to address regulators’ increasing concerns that the merger will lead to higher prices, store closures and job losses.
Under the new agreement, C&S will pay Kroger about $2.9 billion in cash for the stores, up from the previous payout of $1.9 billion.
With the additional 166 stores, the companies are now selling 579 stores to C&S, as well as giving it access to Albertsons Signature and O Organics private label brands.
FDA blocks merger
The announcement comes two months after the Federal Trade Commission, along with eight states and the District of Columbia, filed a suit to block the merger, claiming it would eliminate competition, threaten consumers’ access to affordable groceries and undermine labor unions. At the state level, Colorado and Washington also filed separate lawsuits to block the merger.
Kroger deal with Albertsons
Kroger announced that it was buying Albertsons in October 2022. In February this year, the U.S. Federal Trade Commission (FTC) and eight states sued to block the deal, saying it would raise grocery prices for millions of Americans.
FTC blocks the deal
The FTC has also generally been reticent to accept divestitures as a solution, said Maureen Ohlhausen, who headed the FTC from 2012 to 2018, in a webinar last week.
A district court in Oregon has set an August date for a hearing on the FTC’s bid for a preliminary injunction to block the deal, which would strengthen Kroger’s position as the second-largest player in the U.S. grocery market behind Walmart.
The FTC declined to comment on Kroger’s expanded divestiture package.
Kroger and Albertsons merger under scrutiny
The $24.6 billion consolidation has been under scrutiny since it was announced in October 2022. While Kroger and Albertsons claim that a merger is the only way to compete with retail giants Amazon and Walmart, state and federal regulators are raising concerns that it would have a ripple effect felt by customers, employees and suppliers across the country. (Amazon founder Jeff Bezos owns The Washington Post.)
Rodney McMullen, Kroger’s chairman and chief executive, said in a news release that the revised deal with C&S “addresses concerns raised by regulators.”
Legal advisers close to the transaction and the divestiture deal, however, said Kroger and Albertsons are trying to provide C&S with a business that it can run effectively by increasing distribution capacity that will create a density of local store networks to support its business.
Kroger stock
Kroger’s shares ended Monday up about 1%.
