Kroger Sells Specialty Pharmacy Business Amid Merger Concerns

Supermarket retailer Kroger recently made a move to sell its specialty pharmacy business to CarelonRx, a subsidiary of Elevance Health. This decision comes amidst discussions of a $24.6 billion merger with Albertsons, a grocery store chain.

The sale, announced on Monday, indicates Kroger’s belief that its specialty pharmacy business will thrive better as a standalone entity. Despite the ongoing merger talks, Kroger clarified that the sale isn’t directly related to its plans with Albertsons.

Investors took note, with Kroger’s shares dipping by 1.1% after hours. The specialty pharmacy segment caters to patients with chronic illnesses, operating separately from other Kroger pharmacies. However, the financial terms of the deal weren’t disclosed, with Kroger stating it doesn’t anticipate any significant impact on its full-year financial performance. The transaction is anticipated to be finalized in the latter half of the year.

Colleen Lindholz, president of Kroger Health, emphasized the importance of continuity in operations for both associates and patients. She expressed confidence that the sale would unlock growth potential and yield better outcomes for patients.

Meanwhile, regulatory scrutiny surrounds Kroger’s proposed merger with Albertsons. Concerns primarily revolve around the potential impact on grocery prices and competition. The Federal Trade Commission (FTC) has been vocal, filing a lawsuit against the merger. The agency argues that the consolidation would lead to increased grocery expenses for consumers, countering Kroger’s claims of potential price reductions.

To address antitrust concerns, Kroger and Albertsons have proposed divesting several hundred stores and other assets to C&S Wholesale Grocers. However, the FTC remains unsatisfied, deeming the proposed remedies inadequate. The agency highlighted the substantial market presence of the merged entity, projecting over 5,000 stores and approximately 4,000 retail pharmacies if the merger proceeds.

Overall, Kroger’s decision to sell its specialty pharmacy business reflects a strategic move amidst regulatory uncertainties surrounding its merger plans with Albertsons. The outcome of these developments remains uncertain, with regulatory authorities closely monitoring the situation to ensure fair competition within the grocery industry.