Portland News

Kroger and Albertson set to merge in deal announcement

Kroger announces plans of merging with Albertson
Kroger announces plans of merging with Albertson

Image source: Supermarket News

On Friday, Kroger released an announcement that the company plans to buy Albertson for a nearly $25 billion deal.

The deal could change the retail sector in the United States, affecting how millions of people shop for groceries.

The deal

The deal is expected to close in 2024.

It will combine two of the largest supermarket chains in the United States, creating one of Koger’s most prominent private employees.

The merged companies will have 710,000 employees, most of them in an industry with low union rates.

The deal also means the companies will have nearly 5,000 stores and over $200 billion in sales, potentially reaching 85 million households.

In recent years, the retail industry has seen many unifications, giving many companies a better position to compete with Amazon, Walmart, and other retail giants.

Discount chains like Aldi and Dollar General, warehouse clubs and online grocers have put traditional supermarkets under pressure.

In a statement Friday, Kroger CEO Rodney McMullen said the merger gives the company an edge as a “more compelling alternative to larger and non-union competitors.”

If the deal goes through, it will eclipse Amazon’s $13.7 billion acquisition of Whole Foods five years ago.

It also means Koger becomes the third largest retail chain in America.

Morgan Stanley estimated the combined market would be 13.5%, just behind Walmart’s 15.5% share.

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The effects of inflation

The deal also comes as companies face higher costs and food inflation, which is at the highest level in decades.

Last month, prices continued to rise despite the Federal Reserve’s efforts to curb inflation.

In September, the food at-home index increased by 0.7% from August and 13% compared to last year.

The company said consumers would benefit from the deal as it will use half a billion dollars in cost savings to invest in lower prices.

Albertson is known for Kroger’s higher prices.

Analysts believe Kroger will try to lower the chain’s prices.

Shares and stores

Kroger will buy Albertsons for $34.10 per share.

The stock is up about 30% from the chain’s average share price in September.

Meanwhile, Kroger shares slid 5% in early trading on Friday, while Albertsons shares fell 7%.

Kroger and Albertson currently operate dozens of grocery store chains.

Under its banner, Kroger owns Ralphs, Harris Teeter, Dillons and Fred Meyer, among others.

On the other hand, Albertson owns Safeway and Vons.

The companies said they would create about 400 stores to create a new competitor for antitrust clearance.

Analysts expect stores to close if the deal goes ahead.

They also said passing antitrust scrutiny would be a mountain to climb.

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Reaction to the deal

Joseph Feldman, an analyst with the Telsey Advisory Group, said:

“A deal of this size that has a direct impact on consumers would face significant scrutiny from regulators and take a long time period to be approved.”

Democrats, consumer advocates and unions have opposed the deal.

In their view, this would only hurt consumers, raise prices and crowd out competition.

The deal could also trigger a wave of consolidation among smaller companies in the sector to stay competitive.

Senator Bernie Sanders called on the Biden administration to reject the deal, calling it an absolute disaster.

Meanwhile, an anti-monopoly organization, The American Economic Liberties Project, said the deal would be disastrous for market competition and small businesses.

Consumers will likely be the biggest casualty if the deal goes through.

Lina Khan, chairwoman of the FTC, criticizes corporate consolidation.

The regulator has previously blocked retail mergers, including Staples’ attempted merger with Office Depot.

The FTC is currently investigating anticompetitive practices in the food industry.

Last year, the FTC inquired from Kroger and other companies about why the shelves were emptying as prices rose in the United States.


Two of the largest supermarkets in America are merging

Opinions expressed by Portland News contributors are their own.