Kroger, Albertsons look to save merger deal by selling more stores
The Kroger Co. and Albertsons Cos. are expanding the number of stores they plan to sell in a bid to gain regulatory approval for their long-delayed $25 billion merger.
The two grocers have added 166 more stores to the list of 413 locations to be sold to C&S Wholesale Grocers. The addition means that 579 stores will be sold to — and continue operating as they do now — by the new owner, C&S. Under the new agreement, C&S will pay Kroger about $2.9 billion in cash for the stores, up from the previous $1.9 billion under the original plan.
In addition to maintaining the the sale of Kroger’s QFC, Mariano's and Carrs banners to C&S, the amended agreement includes the sale of the Haggen banner to C&S as well. Stores currently under these banners that are retained by Kroger will be converted into one of the retained Kroger or Albertsons Cos. banners following the close of the transaction with C&S.
Also, under the updated plan, C&S will license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. In these states, Kroger will re-banner the retained Albertsons and Safeway bannered stores following the closing of the merger. Kroger will maintain the Albertsons and Safeway banners in the remaining states.
Earlier this year, the Federal Trade Commission issued an administrative complaint and authorized a lawsuit in federal court to block the proposed merger between the two companies, which was first announced in October 2022. Regulators and unions have expressed concerns that the merger will lead to higher prices, store closures and job losses.
In a release, Kroger and Albertsons said the amended divestiture package “responds to concerns raised by federal and state antitrust regulators regarding the original agreement.” The companies also said they remain committed to defending the merger in court “and unlocking the many benefits it offers.”
“The enhanced divestiture package includes a modified and expanded store set and additional non-store assets to further enable C&S to operate competitively following the completion of the proposed merger,” the grocers stated. “The companies believe the amended divestiture package will bolster their position in regulatory challenges to the proposed merger, including pending court proceedings.”
"We have reached an agreement with C&S for an updated divestiture package that 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," said Rodney McMullen, Kroger's chairman and CEO. "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.”
The updated package includes increased distribution capacity through a combination of different and larger facilities along with expanded transition services agreements to support C&S and the addition of one dairy facility. The corporate and office infrastructure provided to C&S will be expanded as well.
"We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come," said Eric Winn, CEO of C&S. "C&S is a leader in the grocery industry, and we are excited for this expansion of our current retail business, which is a key part of our long-term growth strategy. We look forward to welcoming storied banners, quality private label brands, and a team of experienced retail associates into the C&S family.”
Divested store count by state
The number of stores contained in the divestiture plan by geography is as follows:
- WA: 124 Albertsons Cos. and Kroger stores
- CA: 63 Albertsons Cos. stores
- CO: 91 Albertsons Cos. stores
- OR: 62 Albertsons Cos. and Kroger stores
- TX/LA: 30 Albertsons Cos. stores
- AZ: 101 Albertsons Cos. stores
- NV: 16 Albertsons Cos. stores
- IL: 35 Albertsons Cos. and Kroger stores
- AK: 18 Albertsons Cos. stores
- ID: 10 Albertsons Cos. stores
- NM: 9 Albertsons Cos. stores
- MT/UT/WY: 11 Albertsons Cos. stores
- DC/MD/VA/DE: 9 Harris Teeter stores
The above stores (regardless of banner) will be sold by Kroger to C&S following the closing of the merger with Albertsons Cos.
The amended agreement maintains the divestiture of private label brands Debi Lilly Design, Primo Taglio, Open Nature, ReadyMeals and Waterfront Bistro to C&S. The revised agreement also provides C&S with access to the Signature and O Organics private label brands.