Kroger buys Albertsons for 24,6 billion dollars

Kroger and Albertsons logos
By Reidar Molthe

18 October 2022 15:16

Kroger buys Albertsons for 24,6 billion dollars

The buyout will form one of the world's absolute largest retail companies and number two in USA, only behind Walmart.

Kroger and Albertsons combined

  • Stores: 4.996
  • Pharmacies: 3.972
  • Fuel stations: 2.015
  • Private labels: 34.000
  • Turnover: 210 billion dollars

The two retailers state a total turnover last year of almost 210 billion dollars. The purchase price is also huge. According to a press release Kroger buys the shares in Albertsons for 24.6 billion dollar, approximately 33 percent above listed stock price. 

Walmart still bigger

In the grocery market, the merged company is approaching Walmart in the US market.

In the first quarter Walmart’s markets share was 21,3 percent and Kroger is second with 10,2 percent. Albertsons’ number four with 5,8 percent. Combined Kroger and Albertsons have a market share of 16 percent.

In in the official announcement of the merger, Kroger Chairman and CEO Rodney McMullen says:

“Albertsons brings a complementary footprint and operates in several parts of the country with very few or no Kroger stores. This merger advances our commitment to build a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food and accelerates our position as a more compelling alternative to larger and non-union competitors. We are bringing two purpose-driven organizations together to deliver superior value to customers, employees, communities, and shareholders.”

34,000 products

One of the main purposes of the buyout is to match Walmart's purchasing volume to obtain better purchasing prices and terms with the suppliers.

Altogether, Kroger-Albertsons reportedly has an assortment of at least 34,000 private label products, which are the retailers’ foremost weapon in an inflation-ravaged market.

Potential challenges

The transaction is expected to close in early 2024, subject to required regulatory clearance and closing conditions. The U.S. Federal Trade Commission (FTC) will of course have a say in the matter and can potentially challenge the deal between the two major grocers as antitrust scrutiny intensifies under the Biden administration and decades-high inflation squeezes households.

To help ease those concerns, the companies said they plan to divest some stores.

Neil Saunders, managing director of GlobalData Retail, argues that it is a question of some local issues where a merger produces an exceedingly high market share in certain areas. From a broader national perspective, a combined Kroger and Albertsons does not pose any major threat to the competitive dynamics of the market.

Goldman Sachs and Credit Suisse were the financial advisors to Albertsons, while Citigroup and Wells Fargo advised Kroger.

Kroger will have to pay Albertsons $600 million if the deal is terminated (for instance stopped or hampered too much by the competition authorities).

Sources: Kroger, ABC News, Reuters.

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