Merger Forces Kroger and Albertsons To Sell More Stores

Kroger and Albertsons are selling more of their stores to address concerns about their merger. This move will affect all Safeway locations in Arizona.

Kroger, which owns Fry’s Food in Arizona, and Albertsons, the parent company of Safeway with 105 stores in the state, aim to ease regulatory worries. Arizona officials, including Secretary of State Adrian Fontes and Attorney General Kris Mayes, previously opposed the merger. They feared that a combined entity would control a significant share of the U.S. food retail market, potentially leading to higher prices due to reduced competition.

The companies plan to sell a total of 579 stores in overlapping markets to C&S Wholesale Grocers for $2.9 billion. This is an increase from the original plan to sell 413 stores for $1.9 billion. As part of this updated agreement, Kroger will also sell its Haggen banner to C&S. Moreover, C&S will license the Safeway banner in Arizona and Colorado, as well as the Albertsons banner in California and Wyoming. They will also gain access to certain private-label brands and commit to keeping all stores open while honoring existing labor agreements.

The U.S. Federal Trade Commission (FTC) previously opposed the merger, suing to block the $24.6 billion deal. The FTC argued that the initial divestiture plan was insufficient and would not adequately address competition concerns. They believed that C&S would be left with a mix of unrelated stores and brands, making it difficult to compete against a merged Kroger and Albertsons.

The fate of this new divestiture plan with C&S remains uncertain as it requires regulatory approval. Despite the companies’ confidence in the expanded package, it’s still to be seen whether regulators will approve the merger this time around.

Kroger and Albertsons announced their merger plans in October 2022, aiming to strengthen their competitive position against major players like Walmart and Amazon.