The nation’s two largest grocery retailers reach deal in proposed merger
By Kayla Ross, Back Page Editor
Kroger has announced its colossal proposed merger with Albertsons at a purchase price of $25 billion. The deal would make Kroger the second largest company involved in food sales in the world, second to Walmart.
Kroger, founded and headquartered in Cincinnati, is currently the nation’s largest grocery retailer. Albertsons, founded and headquartered in Boise, Idaho, is currently the nation’s second largest grocery retailer. The two companies employ roughly 710,000 Americans.
Both companies have grocery stores, pharmacies and fuel centers. In Kroger’s official press release regarding the merger, the combined companies announced their plan to invest $1 billion in raising employee wages and benefits. The companies also announced their plans to invest $1.3 billion in improving customer experience at current Albertsons stores.
In Kroger’s statement about the deal, company representatives said that “The combined company will be able to reach an expanded national audience of approximately 85 million households nationwide, fueling growth in alternative profit businesses such as Retail Media, Kroger Personal Finance and Customer Insights. With an expanded footprint and the addition of the recently launched Albertsons Cos. Media Collective, Kroger will enhance its services to media clients and provide more targeted, sophisticated solutions.”
The proposed merger is currently contested by many U.S. senators. Senators Bernie Sanders (D-Vt.) and Elizabeth Warren (D-Mass.) have voiced their concerns, claiming the merger could lead to higher food prices for Americans.
“More mergers and less competition would mean even higher prices — and layoffs for employees,” Warren said.
Sens. Amy Klobuchar (D-Minn.) and Mike Lee (D-Utah) also expressed their consideration of the deal, announcing that there will be a Federal Trade Commision hearing next month regarding the deal before it can go into effect.
“We have serious concerns about the proposed transaction between Kroger and Albertsons,” Klobuchar and Lee said in a joint statement.
Because of the various concerns about Kroger becoming a trust, the companies have shared their plans to create an Albertsons spinoff upon the closure of the deal. The proposed spinoff company of Albertsons will be called SpinCo, and will operate as an independent, publicly-traded, company. Kroger is planning to turn 100-375 existing Albertsons stores into stores led by SpinCo. Company representatives also stated that this merger will likely lead to a decrease in prices, as Kroger is expecting to save $500 million resulting from the deal. Currently, Albertsons averages higher prices than Kroger. Kroger plans to lower Albertsons prices to remain competitive with other food retailers such as Walmart and Aldi. The companies also plan to shutter hundreds of stores across the nation in which there may be overlap between the two stores.
As part of the $25 billion deal, Albertsons paid a $4 billion dividend to its shareholders, approximating $27 per share. This will be payed to shareholders on Nov. 7. In Kroger’s press release, the company said that they plan to be able to deliver larger returns to shareholders due to the merger.
All members of both executive boards of directors voted unanimously for the merger. “We are bringing together two purpose-driven organizations to deliver superior value to customers, associates, communities and shareholders.,” said CEO and Kroger Chairman Rodney McCullen.
The merger is expected to be complete by 2024 but could be delayed by FTC antitrust hearings.