Two large supermarket retailers are attempting one of the largest mergers in retail history.
Key Details
- Kroger’s $25-billion investment in Albertsons positions the company for one of the largest retail mergers in U.S. history.
- “Kroger Co. has lined up the second-biggest bridge financing in the investment-grade world this year to back its mega-merger with Albertsons Cos., braving rising borrowing costs that have left corporate America and Wall Street dealmakers reeling,” says Bloomberg.
- The merger has created anti-trust concerns and fears about how the merger will affect the food supply for tens of millions of shoppers, but Kroger is assuring shoppers that the investment will lower food prices during a time of inflation.
- “The $25-billion deal will actually reduce food prices, say the merging companies. In its Friday announcement, Kroger says it will invest about half a billion dollars of the expected merger-synergy savings into cutting prices,” says Barron’s.
- Kroger’s stock dropped by 7.4% and Albertsons dropped by 2.5% following the announcement.
Why it’s news
The merger of two of America’s largest supermarket chains would turn Kroger into one of the largest employers in the U.S.
“The deal, which is expected to close in 2024, would combine two of the largest supermarket chains in the country and create one of its largest private employers. The two companies have a combined 710,000 workers—most of them unionized in an industry with low union rates—nearly 5,000 stores and more than $200 billion in sales,” says CNN Business.
The problem
Anti-trust and anti-monopoly advocates—including President Joe Biden and U.S. Senator from Vermont Bernie Sanders—are already condemning the purchase, which could result in the purchase being delayed or halted.
“The U.S. Federal Trade Commission could challenge the deal between the two major grocers as anti-trust scrutiny intensifies under the Biden administration and decades-high inflation squeezes households, according to three antitrust experts,” says Reuters.
Kroger and Albertsons are already aware that the merger will create problems though and have laid out the groundwork for breaking off parts of the company that will create anti-trust concerns.
“The two companies operate dozens of grocery chains. Kroger operates Ralphs, Harris Teeter, Dillons, Fred Meyer, and others, while Albertsons owns Safeway and Vons. The companies said they will spin off nearly 400 stores to form a new rival in an effort to gain antitrust clearance,” says CNN Business.
